Analyzing Balance-Sheet Vulnerabilities in a Dollarized Economy: The Case of Georgia

29 Pages Posted: 23 Aug 2006

See all articles by Andreas Billmeier

Andreas Billmeier

International Monetary Fund (IMF) - Middle East and Central Asia Department

Johan Mathisen

International Monetary Fund (IMF)

Date Written: July 2006

Abstract

Balance-sheet analysis (BSA) complements traditional flow-oriented macroeconomic analysis by gauging mismatches in aggregate and sectoral balance sheets of an economy. Enabled by recent progress in data availability, this paper applies BSA to Georgia, focusing on currency mismatches. In reviewing developments over the last five years, the paper finds that the still-high level of dollarization continues to create financial vulnerabilities, but that the overall level of currency mismatch has fallen and that liquidity problems are unlikely, in part owing to a strengthening of sectoral buffers, hedges, and insurance against shocks. Policy recommendations include accumulating reserves, strengthening securities markets, enhancing banking supervision, and maintaining a flexible exchange rate.

Keywords: Balance-sheet analysis, BSA, Georgia, vulnerabilities, currency mismatch

JEL Classification: C82, E60, M41, O11, O52

Suggested Citation

Billmeier, Andreas and Mathisen, Johan, Analyzing Balance-Sheet Vulnerabilities in a Dollarized Economy: The Case of Georgia (July 2006). IMF Working Paper, Vol. , pp. 1-29, 2006. Available at SSRN: https://ssrn.com/abstract=926228

Andreas Billmeier (Contact Author)

International Monetary Fund (IMF) - Middle East and Central Asia Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Johan Mathisen

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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