The value of a currency, measured in terms of other currencies, has consequences for the real economy. A more expensive lari, for example, makes it more profitable to import goods into Georgia. The importer has to pay the foreign goods with foreign currency, and when the lari is more valuable, less lari are needed to pay for them. Driven by competition, importing companies will forward some of this cost reduction to the consumers and charge lower prices for imported goods.
At the same time, an appreciation of the lari puts a burden on exporters. A bottle...
ISET Economist Blog
A blog about economics in the South Caucasus.
Feb
03
Jan
31
Fight of the Century? Well, that was Joe Frazier against Muhammad Ali, New York 1971, right? Wrong! For an economist, the Fight of the Century refers to the intellectual debate between the illustrious economists John Maynard Keynes (1883-1946) and Friedrich August Hayek (1899-1992). A battle at least as hot as the boxing fight, if not even much hotter!
What was this all about? And does it have to do anything with Georgia? It does…
A LACK OF DEMAND…
What are the causes of recessions and unemployment? Keynes had a very clear idea about this. During a slump...
Dec
13
For many observers, the Georgian job market is a mystery. Companies are bitterly complaining about a lack of engineers, forcing them to withhold the expansion of production capacities and to cut down investments. Yet Georgian young people, who could make good fortunes by studying technical subjects, prefer to learn law, business administration and the like, qualifications that are oversupplied in the market and on average do not yield high salaries.
Young Georgians, lacking information on what sells well in the job market, apply a simple decision rule ca...
Dec
09
When a country engages in scientific research, the fruits are harvested by the whole of humanity. Fundamental research, generating knowledge without direct applications but needed for developing applications, is published in international scientific journals open to everybody. A society can exploit this knowledge without having to pay royalties or patent fees, and, most importantly, without investing in its own research facilities.
Yet even the results of applied research can hardly be monopolized. The economic fortunes of some Asian countries, in partic...
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