ISET

ISET Economist Blog

A blog about economics in the South Caucasus.

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Nov
18

Georgia Riding the Waves of a Political Business Cycle

In our last week’s article we examined Georgia’s economic growth in the 12 months before the 2012 parliamentary elections.  In particular, we reviewed the popular argument that much of this economic growth was driven by the “political business cycle” effect of public (over)spending prior to the elections. Our analysis showed that the construction sector (the prime suspect for politically motivated spending) did in fact exhibit an atypical growth pattern just before the elections, and that growth rates in construction collapsed right after October 20...
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Nov
10

Georgia's Growth Slowdown - The Case of a Political Business Cycle?

October 27, 2013 heralded a new era in the Georgian politics. The year of power sharing between the two main rival political forces, the so-called “era of cohabitation”, has officially ended, and we can now start to look back and take the stock of how the political developments in the country affected economic growth. In two articles that we publish today and in the next week, we will aim to provide an overview of some specific trends. We will first look at the general economic trends in the year between the parliamentary and the presidential elections (...
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Nov
04

From Thieves-in-Law Towards the Rule of Law

Thomas Hobbes (1588-1679) in his Leviathan describes the conditions where “there is no place for Industry; because the fruit thereof is uncertain; and consequently no Culture of the Earth; no Navigation, nor use of the commodities that may be imported by Sea; no commodious Building; no Instruments of moving, and removing such things as require much force; no Knowledge of the face of the Earth; no account of Time; no Arts; no Letters; no Society; and which is worst of all, continual fear, and danger of violent death; And the life of man, solitary, po...
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Jun
28

Georgian Banking Sector Development: Is There Room for Growth?

The Georgian economy faces many challenges, not least of which are access to finance and the extremely high cost of financing private enterprises. With the cost of borrowing (real interest rate) reaching 17.3% on average in April 2013, businesses find it very difficult to function, let alone invest in innovative technologies, long-term growth and development. These challenges can be directly traced to issues raised in one of the ISET Economist blogs: the Georgian financial industry is still very far from being a well-developed, efficiently functioning sy...
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Jan
25

Is a Deposit Insurance Program Needed for Financial Stability?

Georgia is among a few countries in the world that does not have a deposit insurance system in place. Does the country need to have such a system? Or is deposit insurance likely to do more harm then good? The answer is not as clear-cut as it may seem. Deposit insurance is a relatively new phenomenon in international banking. For example, in 1974 only 12 countries had explicit deposit insurance schemes, while in 2003 the number already rose to 87. United States was one of the first countries in the world to establish such as scheme. The Federal Deposit In...
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Nov
09

On Democratization and Growth - Once Again

A long season of high–stakes elections in Georgia, Ukraine, and now the United States is finally over. Once the last campaign posters are taken down, we may as well start asking: now what? Whether we like to admit it or not, the success of democracy is probably ill measured by the show of competitive campaigns or the transparency of the voting system. Instead, the success largely depends on how informed and engaged in the political process the general public remains after the elections. This is something Ukraine has discovered the hard way sinc...
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