Inflation regulation in Georgia

Project staff Lasha Kavtaradze, Nodar Kiladze, CDS

 

The purpose of this study is to identify the causes of inflation in Georgia and to analyze the main factors that, according to economic theory, influence the change in the price level, based on which relevant recommendations will be developed. Inflation, because of its negative effects, causes negative emotions in society. Both high and zero inflation (or approaching zero) are associated with different types of costs to society, which ultimately result in welfare losses. Changing price levels in a real economy is a very dynamic process and it is difficult to pinpoint a specific cause or factors causing inflation. Price stability is a fundamental factor required for achieving high and stable economic growth. Accordingly, the regulation of inflationary processes is quite important. The practical significance of this issue is of high importance, as it is possible to make credible forecasts with the help of factors selected from the peculiarities of the Georgian economy and then use them effectively in the monetary policy process.