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On Tuesday, March 29 ISET and the Asian Development Bank co-organized a seminar on Inclusive Economic Growth in Georgia. The event was part of a joint project of ISET and ADB, Good Jobs for Inclusive Growth, aimed at creating conditions to enable inclusive economic growth in developing countries. In addition to focusing on inequality in income and opportunities, the seminar examined the issue of social protection and development of institutions.
According to Michael Beenstock, the leader of ISET-PI's research team, Georgia was a much more equal society in 2015 compared to late 1990s. However, when we look at the spatial aspect of inequality, most improvement is related to greater equality within regions, not between them. Thus, the gap between Tbilisi and the rest of Georgia remains intact. Another positive finding is that Georgia continues to enjoy fairly high (though declining) income mobility - within the same year many people see their incomes go up and down in a very dramatic fashion, resulting in a more equitable distribution of income. The gender gap has also narrowed over time: the "premium" for changing (statistically, not surgically) one's gender from female to male (holding constant other observable characteristics such as age, education and experience) has come down over the last 15 years.
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Why do central banks regulate commercial banks and not that of, say, bakeries? This was the fundamental question Giorgi Kadagidze, a former governor of the National Bank of Georgia, tried to answer during his presentation for ISET students, faculty, and executives enrolled in ISET’s Finance for Professionals course on Tuesday, March 15.
According to Mr.Kadagidze, banks, unlike bakeries, operate with other people’s money. They are taking deposits and are transforming them into loans. Mr.Kadagidze used an ordinary balance sheet to demonstrate some of the basic principles of banking regulation: “fit and proper” (essentially to make sure that a bank’s shareholders and principals are not thieves); capital adequacy (how much own capital does a bank has to compensate depositors in case some of its loans go bad); asset quality (for instance, are loans too concentrated in a particular sector), and liquidity (does the bank have enough cash to handle an increase in short-term obligations).
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