Dollarization in the prism of state building: the case of Georgia

Abstract

ABSTRACT The Rose Revolution (2003) marked a beginning of the ‘new’ Georgian state and led to the recovery of the Georgian economy, but the level of dollarization remained high, exceeding 70%. Even though dollarization is a direct threat to the monetary sovereignty, as well as financial and political stability, it did not become an integral part of the state building project. Dollarization persistence remains an unresolved puzzle in the academic literature, as well. In contrast to the economized debates on dollarization, this paper engages with a political economic analysis of the phenomenon. It conceptualizes dollarization within a peripheral state framework on the example of Georgia (2003–2009) and argues that dollarization is embedded in the state building agenda of the post-revolution government, as well as in the accumulation regime, global currency hierarchy and government-central bank relations.