ISET

ISET Economist Blog

A blog about economics in the South Caucasus.
Sep
27

“You Merchants Are Cowards”…

In the very first class on the Principles of Economics we teach our students how beneficial trade is. We explain that voluntary exchange (trade) increases overall welfare and is mutually beneficial. Economists tend to regard this basic “principle of economics” as an axiom, providing the basis for many other principles of economics and, most importantly, the notion (or fallacy) that “the markets know best”… Perhaps paradoxically, despite the many beneficial features of trade, merchants (i.e. professional traders), rarely enjoy social esteem. One reason fo...
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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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Recent Comments
Guest — RT
> After further decomposition and making additional assumptions, the CA balance can be written as the difference between national ... Read More
Tuesday, 18 June 2013 2:02 AM
Guest — RT
Right. Y - C - G is savings in textbooks, but in real life S are Disposable Income - C - G = (Y + Net Current Transfers + Balance ... Read More
Wednesday, 19 June 2013 3:03 AM
Guest — Givi
Hello, Robert. I agree. here I just assumed that from GDP identity what we get is that the difference between national savings and... Read More
Tuesday, 18 June 2013 11:11 AM
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Mar
22

On Social Planning, Symphonies and Cacophonies

An unprejudiced look at the Georgian economy is rather disenchanting. Starting in 1990 at a per capita income that was close to Poland’s, Georgia went into a free fall as a result of secession wars, loss of markets, an explosion of crime and corruption, and the staggering incompetency of its governments. It took Georgia 17 years, until 2007, to merely return to where it stood at the end of the Soviet Union. In these 17 years, Poland increased its output per capita by almost 700%, achieving a level of more than 25% percent of its neighbor Germany. While G...
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Mar
01

Free Trade vs. Protectionism: Georgia's Contribution to an Old Debate

Georgia is flooded with cheap Turkish products: tasteless winter tomatoes, clothes, construction materials, you name it. Turkish goods are everywhere – in specialized shops in central Tbilisi, supermarkets, and the Eliava Bazroba. Is this happening because Turkey is our neighbor, because Georgian people love Turkish products, or what? Turkish exports to Georgia have been growing very fast since the Rose Revolution but they received an additional push in 2009, following the signing of a bilateral free trade agreement (FTA) between the two countries in Nov...
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Guest — Simon Appleby
There have been unofficial barriers to food imports to Georgia for some years, including eggs and chilled beef. These are now bein... Read More
Friday, 01 March 2013 5:05 PM
Guest — Irakli
I totally agree that those instruments will be very beneficial for development of Georgian agricultural production at some point. ... Read More
Friday, 01 March 2013 8:08 PM
Guest — Simon Appleby
Reducing taxes is hardly "giving gold bullion" to investors; they have to raise bullion on their own at very high premiums to acco... Read More
Friday, 01 March 2013 9:09 PM
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Jan
29

Dependence on Global Prices

According to data provided by the Food and Agriculture Organization of the United Nations (FAO), in the last five years there were two hikes in global food prices. The first hike was in 2008, when the global food price index reached 224.4 points (up by 46% in year-on-year terms). The second wave started in late 2010, reaching a peak in February 2011 (237.9 points). More recently, the FAO Food Price Index averaged 209.3 points in December 2012, down 2.4 points (1.1%) from November. The downward movement was mostly driven by decreasing cereals p...
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Dec
17

Touristic Destination or Trade Corridor?

Georgia’s competitiveness is said to hinge on its strategic location between East and West. The latest data on border crossings (by people and trucks) allow to shed light on progress to date and take a glimpse into the future. The efforts to develop Georgia as a major touristic destination in recent years seem to have paid off. The number of international arrivals to Georgia has been growing rapidly, reaching 2,822,363 in 2011. In the first 11 months of 2012, the number of visitors exceeded 4mln, which is 58% more than in the same period of 2011. Interna...
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