Unravelling The Persistence of Dollarization: The Case of Georgia

259 Pages·2022·8.384 MB·English

by  Ia Eradze

“Ia Eradze’s book represents a milestone in the study of the dollarization of
a transition economy. She has demonstrated that dollarization cannot be
derived solely from the calculations of utility-maximizing individuals, but
that its dynamics must be understood in terms of the interplay of modes of
accumulation, institutional structure, social power relations and prevailing
ideas. Ms. Eradze has presented a political-economic work in the truest
sense.”
Prof. Dr. Christoph Scherrer Director, International Center for
Development and Decent Work, University Kassel, Kassel

Unravelling the Persistence of Dollarization

This volume engages with the roots, dimensions, and implications of foreign
currency domination in states with a national currency. Referred to as unof­
ficial dollarization in literature, this is a worldwide phenomenon among
developing countries and has a long history.
This monograph provides a political economic analysis of dollarization in
Georgia and is structured around three themes: the genesis of dollarization
(1991–2003), the persistence of dollarization (2003–12) and the politicization of
dollarization (2012–19). The case of Georgia is especially representative of
the post-socialist transition states, but also has wider applicability.
A high level of dollarization is a significant barrier to economic growth,
macroeconomic and political stability, functional monetary policy, as well as
social welfare. The Covid-19 crisis and the increasing debt of developing
countries in foreign currency exacerbate dollarization-related vulnerabilities
for these economies.
This book will be of interest to postgraduate students in global/comparative
political economy, development economics or transition economies,
researchers in monetary sovereignty, central banking, exchange rate policies,
currency hierarchy, money, financialization, and policy makers in dollarized
countries and global institutions.
Ia Eradze is a researcher at the Institute for Social and Cultural Studies, Ilia
State University, Tbilisi. She is also a fellow in the Legacies of Communism
research network, which was initiated by the Leibniz Centre for Con­
temporary History in Potsdam (ZZF). Her area of research is political
economy and historical evolution of finance in the post-socialist space. Her
most recent pieces include Financialization of Monetary Policy in a Dollarized
Economy: The case of Georgia, https://doi.org/10.1093/cje/beac019 Cambridge
Journal of Economics and Taming Dollarization Hysteresis: Evidence from
Post-socialist States, which will appear in an edited volume (Edward Elgar
Publishing).
Europa Economic Perspectives
Providing in-depth analysis with a global reach, this series from Europa
examines a wide range of contemporary economic issues from areas around
the world. Intended to complement the Europa Regional Surveys of the
World series, Europa Economic Perspectives will be a valuable resource for
academics, students, researchers, policymakers, business people and anyone
with an interest in current world economic affairs.
While the Europa World Year Book and its associated Regional Surveys
inform on and analyse contemporary economic, political and social devel­
opments, the Editors considered the need for more in-depth volumes written
and/or edited by specialists in their field, in order to delve into a country’sor
a region’s particular economic situation, or to examine economic theories in
the context of current global economic affairs. Volumes in the series are not
constrained by any particular template, but may explore any aspect of a
country’s recent economic issues in order to increase knowledge.
Advances in Geoeconomics
Edited by J. Mark Munoz
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Do As We Say and Not As We Do
Hilmar Þór Hilmarsson
Deficit Politics in the United States
Taxes, Spending and Fiscal Disconnect
Dennis S. Ippolito
The Japanese Economy
Strategies to Cope with a Shrinking and Ageing Population
Randall S. Jones
Unravelling the Persistence of Dollarization
The Case of Georgia
Ia Eradze
For more information about this series, please visit: www.routledge.com/
Europa-Economic-Perspectives/book-series/EEP.
Unravelling the Persistence of
Dollarization
The Case of Georgia
Ia Eradze
Cover image: © Shutterstock
First published 2023
by Routledge
4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
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Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2023 Ia Eradze
The right of Ia Eradze to be identified as author of this work has been
asserted in accordance with sections 77 and 78 of the Copyright, Designs
and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced
or utilised in any form or by any electronic, mechanical, or other means,
now known or hereafter invented, including photocopying and recording,
or in any information storage or retrieval system, without permission in
writing from the publishers.
Trademark notice: Product or corporate names may be trademarks or
registered trademarks, and are used only for identification and explanation
without intent to infringe.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
A catalog record has been requested for this book
ISBN: 978-1-032-14584-6 (hbk)
ISBN: 978-1-032-14615-7 (pbk)
ISBN: 978-1-003-24017-4 (ebk)
DOI: 10.4324/9781003240174
Typeset in Times New Roman
by Taylor & Francis Books
To my parents and their generation, who had to carry the heaviest
burden of post-Soviet transition.

Contents

List of illustrations xi

Abbreviations xiii

The author xv

Acknowledgements xvi

PART I

Dollarization and its discontents 1

1 Introduction: Why does dollarization matter and what is

at stake? 3

2 The obscurities of dollarization 10

PART II

The genesis of dollarization 33

3 Dollarization within the agenda of dollar diplomacy

and transition 35

4 The Georgian state as a vessel of dollarization 53

5 Hyperinflation: The origins of dollarization and the birth of

the lari 75

6 A new financial system meets dollarization 93

PART III

The persistence of dollarization 107

7 The birth of the new Georgian state 109

8 Peripheral financialization and the persistence of dollarization 138