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ISET Economist Blog

A blog about economics in the South Caucasus.
Givi Melkadze has not set their biography yet
Jun
17

Georgia's Current Account Deficits: Good or Bad?

There has been a lively debate on current account (CA) imbalances around the world. Georgia is not an exception with its politicians and economists often complaining about Georgia’s current account deficits (see Figure 1) and discussing potential ways of reducing or even eliminating them without actually reasoning why one should do so. It seems that these people a priori assume that current account deficits are bad. But are CA deficits always bad? The answer will depend on a country’s specific circumstances and the reasons that give rise to them. Let us ...
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May
07

Georgian Banks: Friends or Foes?

Once considered the most dynamic sector of the Georgian economy, the banks have recently become a target for fierce criticism by Georgian policymakers and media. In early March, NBG president Giorgi Kadagidze called on commercial banks to reduce interest rates on corporate loans to help accelerate the country’s economic recovery. Bloomberg reports him saying that “interest rates on corporate loans are inappropriately high, between 24 and 30 percent, whereas they should be around 12 percent”. Legislative initiatives seeking to cap interest rates, weaken t...
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Apr
05

Can Georgia Escape the Biggest Ponzi Scheme on Earth?

Many countries in the world run their public pension systems under the so called pay-as-you-go (PAYG) scheme, where pensioners receive their money from those who are currently working. The transfers are made through separate obligatory contributions to the pension system or through general taxes. Unfortunately but predictably, in the last decades the shrinking and ageing populations caused severe problems for PAYG systems, both in advanced as well as in less developed countries. An inevitable consequence of people living longer and fertility rates going ...
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Jan
18

On Inequality, Growth and the Kuznets Curve in Georgia

Is inequality bad for economic development? There has been a lively debate on this issue. Some economists argue that inequality is necessary for economic growth, while others are against it. Relatively recent empirical studies have found that in countries with relatively low per capita income inequality hampers growth. One of the main ways in which high inequality negatively affects economic growth is social turmoil. Social discontent is translated into socio-political instability, raising political and economic uncertainty in a country, which in turn im...
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Nov
23

Math Education – an Engine of Economic Growth in the 21st Century

  MATH EDUCATION AND GROWTH: RECENT EVIDENCE Mathematical literacy has always been a key factor in improving a country’s productivity and competitiveness. Stanford University’s Eric Hanushek has shown that there is a positive relationship between students’ performance in mathematics tests and economic growth. This is not at all surprising. Proficiency in math implies a high-level of cognitive skills among the labour force, in other words a high quality of human capital, which leads to technological innovation and productivity gains. Another more re...
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Sep
26

Labor Migration and Remittances to Georgia

As any other labor-exporting country, Georgia faces both the costs and benefits of migration. The main costs include human capital flight – the so-called “brain drain” – and the distortion of the age and gender structure of the population. The benefits include alleviating social pressures caused by high unemployment rates, the international experience and skills returning migrants bring back to their home countries, and, very importantly, the remittances, or money transfers, that emigrants make to their families. For many households in Georgia these mone...
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