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...
ISET Economist Blog
A blog about economics in the South Caucasus.
Mar
29
Mar
22
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...
Mar
12
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...
Mar
01
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...
Feb
18
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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