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ISET Economist Blog

A blog about economics in the South Caucasus.
May
27

Short-Term Swings of the Georgian Lari: A Guessing Game with High Stakes

In the last two weeks lari depreciated, once again, against the US dollar. Georgian currency lost about eight tetri against its American counterpart, causing quite a stir in the media, among political groups and economic experts. While government authorities claimed that the recent developments are short-term fluctuations driven by negative expectations, Turkish lira depreciation, dollar’s global strengthening, and are therefore not connected to the fundamentals of the Georgian economy, the members of opposition were quick to blame incompetent fiscal and...
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Feb
25

Law Can’t Buy Me Love… To The National Currency

  Beginning in July 2017, if an entrepreneur offers and/or advertises a property and/or service for sale in the territory of Georgia, the price of the property/service shall be expressed solely in GEL. According to the bill, failure to abide by the new law when denominating the price will lead to a warning, while a repeated offense will lead to a penalty of 1000 GEL. Each subsequent offense will be subject to a penalty of 5000 GEL. BACKGROUND INFORMATION This law is one of a few changes which will take place in support of a de-dollarization plan imp...
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Eric Livny
A great article with a great title. One small comment. The costs of construction can be in GEL or USD, but the financing of constr... Read More
Monday, 27 February 2017 12:12 PM
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Oct
17

Khachapuri Index, Exchange Rate Dynamics and International Tourism

One glance at the ₾Khachapuri Index chart (for locals) tells the whole story of Georgian agriculture. Left to fend for themselves during the cold winter months, Georgian cows produce very little milk, sending dairy prices through the roof. Conversely, milk production peaks with the arrival of sunny weather and green fodders in early spring, leading to a collapse of milk prices. In the absence of large-scale industrial milk production (that does not depend as much on climate and weather conditions), the roller coaster image repeats itself, year in and yea...
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Oct
25

Borrow in Dollar or Lari? That Is the Question!

The Georgian lari’s depreciation against the dollar has been a pressing issue for everyone: economists and policymakers, students, housewives and even the good-for-nothing “birzhavik’s”. The weaker lari may be good news for Georgia’s export competitiveness and trade balance, yet it also pushes up the prices of anything we import. This may include some luxury items we can do without, but also many things that are absolutely essential for the Georgian economy: primary commodities, production inputs and machinery, foodstuffs and medicines. And by raising th...
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Guest — StephanvonCramonUniversityofGttingenandGermanEconomicTeamGETinGeorgia
Interesting, thank you. However, perhaps it should be stated very clearly: if you earn your income in lari, borrowing in dollars m... Read More
Sunday, 25 October 2015 8:08 PM
Eric Livny
Yes, I agree with Stephan that borrowing in foreign currency is ultimately a gamble.But agree with Giorgi that this may be a gambl... Read More
Monday, 26 October 2015 9:09 AM
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Sep
14

Georgia’s Currency is Much More Than the GEL/USD Exchange Rate

It is easy to understand what it means for an economy to be weak or strong. We know that a strong economy is characterized by low unemployment and high growth rates. Other desirable traits are, for example, low levels of poverty and income inequality, when all citizens enjoy reasonable standards of living.  Things are less clear when we think about our national currencies.  When designating currencies as “weak” or “strong”, we usually think of the exchange rate against the dollar or the euro. Having a “weak” currency sounds like a bad thing, wh...
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Guest — JanFidrmuc
Good article. I wonder if dollarization (or euroization) might be the way forward, either by completely replacing the lari in circ... Read More
Tuesday, 15 September 2015 2:02 PM
Guest — Yasya
As far as currency is concerned I am of the opinion that adopting either USD or Euro may not have clear advantages for Georgia. Th... Read More
Tuesday, 15 September 2015 6:06 PM
Guest — Chase
I agree with Yasya that it wouldn't be the most advantageous. To add to the argument, I interviewed Matthias Matthijs of Johns Hop... Read More
Wednesday, 16 September 2015 10:10 AM
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