During the twin crises of 2008–09 Georgia’s foreign exchange reserves have been exposed to a number of external and internal drains. Its exports declined by 21 percent from peak to trough. Bank deposits declined by more than 20 percent in late 2008–early 2009, while deposit dollarization...

This Selected Issues paper reviews the financial sector development in Georgia in recent years, and investigates why it has lagged behind economic development, as well as developments in more advanced transition economies. The paper briefly reviews recent financial sector development in Georgia,...

The econometric results show that it is feasible to estimate robust price and inflation equations for Georgia. The long-term price equation expresses prices as a function of money, the exchange rate, and real income and may be interpreted as portraying equilibrium in the goods market. The paper...

Inflation-forecast targeting is state of the art for monetary policy. This book explores first principles, including managing short-term policy trade-offs. The book also outlines efficient operational procedures and reviews the experiences of Canada, the Czech Republic, and India. The analysis...

A central bank must decide on the frequency with which it will conduct open market operations and the variability in short-term money market that it will allow. It is shown how the optimal operating procedure balances the value of attaining an immediate target and broadcasting the central...

Market reaction to a change in official interest rates will depend on the extent to which the change is anticipated, and on how it is interpreted as a signal of future policy. In this paper, a technique is developed to separate the anticipated and unanticipated components of such changes and is...