Methodological foundations for modeling uae–azerbaijan economic relations: a system dynamics approach to trade, fdi, energy transition and connectivity

Abstract

This article develops a methodological framework for modeling economic relations between the United Arab Emirates and Azerbaijan through a System Dynamics approach. The study begins by reviewing the main methodological tools used in the analysis of international economic cooperation, including gravity models, CGE/GTAP models, panel econometric approaches, input–output and GVC/TiVA analysis, network analysis, Difference-in-Differences and synthetic control methods. While these approaches provide valuable insights into trade potential, macroeconomic effects, value-chain integration and causal relationships, they are limited in capturing feedback loops, time delays, nonlinear effects and cross-sectoral interactions. The paper argues that UAE–Azerbaijan economic relations should be understood as a dynamic system in which trade, FDI, energy transition, logistics connectivity, tourism mobility and institutional cooperation mutually reinforce or constrain each other over time. The proposed System Dynamics framework conceptualizes bilateral economic integration through stocks such as Bilateral Economic Integration Stock, UAE FDI Stock in Azerbaijan, Re-newable Energy Cooperation Capacity, Logistics Connectivity Capacity, Tourism and Mobility Intensity and Institutional Cooperation Strength.