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ISET Economist Blog

A blog about economics in the South Caucasus.
Mar
29

Arbitrage? Not in Georgia!

I have snapped the picture above in one of Tbilisi’s main streets. To the economist’s eye, however, this picture should be disturbing. While the general observer will see clean and wide sidewalks, beautiful classical style buildings, and a single pedestrian in this early hour of the day, one also sees two adjacent currency exchange booths (Lombardi, as they are called here). The nearer sign shows that they buy $100 for 165.2 GEL, and sell $100 for 165.6 GEL—ignore the listed Euro exchange rate for the sake of this illustration. The farther sign shows res...
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Guest — Lasha Nikolaishvili
It is a good evidence. I think one explanation could be that sometimes, when these (second type) firms after some transactions hav... Read More
Friday, 29 March 2013 8:08 AM
Guest — Giorgi Tsutskiridze
I think the main reason why the third actor is not coming in the business with narrower spread is that this new spread will not be... Read More
Friday, 29 March 2013 11:11 AM
Guest — Nino
One explanation could be that lazy owner had not yet opened his booth that early morning What we usually observe is that if you ... Read More
Friday, 29 March 2013 11:11 AM
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Mar
12

The Price of Money

Consider yourself in Germany in 1923, entering a bar for drinking a beer. How much would you have had to pay for that? Well, the average price for a glass of beer in the autumn of 1923 was four billion Marks. One year before, you could have bought it for less than 300 Marks, and in the beginning of 1921 for about 30 Marks. In 1923, a phenomenon called hyperinflation reached its peak in Germany.  People who received their salaries in the morning had to have spent it by the evening, because on the next day it would have lost most of its value. The val...
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Guest — Florian
Very interesting -- I did not know you experienced Ceaucescu's Romania from the inside! Somebody who visited Romania in the 80's t... Read More
Wednesday, 13 March 2013 3:03 AM
Guest — Eric
I used to be able to smoke my money back in 1986! I lived in Romania (as a young Israeli diplomat) and the going currency for most... Read More
Tuesday, 12 March 2013 7:07 PM
Guest — Giorgi Bakradze
True. But that's a different argument whatsoever. Size of the economy doesn't come into it.
Thursday, 14 March 2013 11:11 PM
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Feb
18

The Future of Labor

According to standard economic theory, labor is a good like any other, traded on the labor market. Like with all other markets, the price for labor, which is the wage, ensures that supply meets demand. When there is a shortage of labor, the price of labor goes up, and more people offer their labor on the market. When there is an abundance of labor, a decrease in the price of labor prevents unemployment. Economics recognizes that there is not just one market for labor, and whenever necessary, one considers special labor markets which are usually defined b...
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Guest — Giorgi Mekerishvili
Florian, thanks for this niece piece. Human imagination is boundless and thats why I think that there will always be demand for la... Read More
Monday, 18 February 2013 12:12 PM
Guest — Florian
Giorgi, Perhaps you are right, but I am not that optimistic. If you consider the least qualified strata of people, there is almost... Read More
Monday, 18 February 2013 2:02 PM
Guest — Florian
Again such an optimistic comment :-). I hope you are right! But what do the facts say?Already today, we have mass unemployment in ... Read More
Tuesday, 19 February 2013 11:11 AM
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Feb
13

Use of Consumer Confidence Index

The Consumer Confidence Index (CCI) attempts to capture the expectations of consumers about the future development of the economy.  According to economic theory, optimistic consumers are willing to spend more money and reduce their savings, while pessimistic consumers do the opposite. This is consistent with the intuition that consumption activity and saving behavior are driven by the expectations of the future. Beyond that, the CCI can be a powerful indicator of the well-being of the economy. WHY? If indeed the consumption behavior is driven b...
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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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Guest — YB
Indeed, it was a typo, Giorgi, thanks for catching it!
Friday, 25 January 2013 9:09 PM
Guest — Giorgi Bakradze
A typo - "Georgia is among a few countries in the world that does have a deposit insurance system in place". Should be "does not".... Read More
Friday, 25 January 2013 9:09 AM
Guest — YB
That's a good point, Giorgi. In fact, one can claim that systemic crises are in some ways good for growth ( see Ranciere, Tornell ... Read More
Saturday, 02 March 2013 10:10 PM
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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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Guest — Giorgi Mekerishvili
Interesting piece Givi. Figure 2 shows country level Gini Index as far as I understand. So, it catches urban/rural inequality (to ... Read More
Friday, 18 January 2013 4:04 PM
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