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Important aspects - why monetary policy does not work in Georgia

Gerliani
Ramaz Gerliani

Ph.D. in Economics Associate Professor at Black See International University

Tvauri
Giga Tvauri

Vice-President of Economic Transformation Center, Ph.D. candidate at Business and Technology University

Abstract

Georgia is a developing economy with a gross domestic product of 72.3 billion GEL ($26.8 billion) (Geostat 2022). Macroeconomic parameters in the country react sensitively to various issues. Due to the impact of local or foreign factors, the rate of inflation in the country was double-digit for almost 18 months (Geostat 2022), which was a great loss for the country and its population. This article presents a number of aspects of monetary policy, namely the interest rate and the inappropriate effect of monetary instruments on inflation regulation or exchange rate stabilization, which is conditioned by the overriding rational expectation and normative economic understanding. Using the "micro-macro synthesis" and analysis, the article discusses how important the incomes of citizens and the demand elasticity of the consumer basket are for the effective use of monetary instruments; budget limitation of family farms; The influence of the duration (time) of the use of monetary instruments on monetary policy and the scientific condition of "rational expectation" and "asymmetric information acquisition" by households and business entities. Discussion of the impact of non-inclusive economic growth on the effectiveness of monetary instruments is opened. Finally, we conclude from the discussion that the mentioned economic aspects should be taken into account, including microeconomic ones, when using the monetary policy tools effectively.

Keywords: Inflation, Monetary policy, Interest rate, Macroeconomics.

References:

  1. Silagadze.A, economic doctrines. National Academy of Sciences of Georgia. Tb., "Innovation", 2010;
  2. Rainer Klump: "Economic policy, goals, instruments and institutions" (in Georgian), Tbilisi 2015;

3.Khidasheli.M, "General theory of international finance" 2017. https://el.ge/uploads/2353/4239.pdf;

  1. Shamugia, E. "Double-digit inflation is one of the reasons why the population cannot perceive the benefits of economic growth" 2023;

5.Geostat 2022. https://www.geostat.ge/ka/modules/categories/26/samomkhmareblo-fasebis-indeksi-inflatsia;

6.Ministry of Finance of Georgia - State Debt Statistics 2023. https://mof.ge/saxelmwifo_sashinao_valis_statistika;

7.National Bank of Georgia. 2022, https://nbg.gov.ge/page/%E1%83%9A%E1%83%90%E1%83%A0%E1%83%98%E1%83%96%E1%83%90 %E1%83%AA%E1%83%98%E1%83%98%E1%83%A1-%E1%83%A6%E1%83%9D%E1%83%9C%E1%83%98% E1%83%A1%E1%83%AB%E1%83%98%E1%83%94%E1%83%91%E1%83%94%E1%83%91%E1%83%98;

8.https://nbg.gov.ge/page/%E1%83%A1%E1%83%90%E1%83%AE%E1%83%94%E1%83%9A%E1%83%9B %E1%83%AC%E1%83%98%E1%83%A4%E1%83%9D-%E1%83%A4%E1%83%90%E1%83%A1%E1%83%98%E1%83%90%E1%83%9C%E1%83%98%E1%83%A5%E1%83%90%E1%83%A6%E1%83%90%E1%83%9A%E1% 83%93%E1%83%94%E1%83%91%E1%83%98.

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The New Economist N 4 (2023), Vol. 18, Issue 4

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Published Date:

11/01/2024

Copyright (c) 2024 Ramaz Gerliani, Giga Tvauri

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