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 ...
ISET Economist Blog
A blog about economics in the South Caucasus.
Jun
17
May
07
Once considered the most dynamic sector of the Georgian economy, the banks have recently become a target for fierce criticism by Georgian policymakers and media. In early March, NBG president Giorgi Kadagidze called on commercial banks to reduce interest rates on corporate loans to help accelerate the country’s economic recovery. Bloomberg reports him saying that “interest rates on corporate loans are inappropriately high, between 24 and 30 percent, whereas they should be around 12 percent”. Legislative initiatives seeking to cap interest rates, weaken t...
Apr
05
Many countries in the world run their public pension systems under the so called pay-as-you-go (PAYG) scheme, where pensioners receive their money from those who are currently working. The transfers are made through separate obligatory contributions to the pension system or through general taxes. Unfortunately but predictably, in the last decades the shrinking and ageing populations caused severe problems for PAYG systems, both in advanced as well as in less developed countries. An inevitable consequence of people living longer and fertility rates going ...
Jan
18
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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