Important aspects - why monetary policy does not work in Georgia

Ramaz Gerliani

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

Giga Tvauri

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


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.


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

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

Published Date: