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, comparing it with developments in its neighboring countries in the Caucasus, the seven poorest countries in the Commonwealth of Independent States (CIS-7), the Baltics, and central and eastern Europe. The paper also analyzes possible factors constraining financial intermediation in Georgia and in some of the CIS countries more generally.
driven, to a considerable extent, by economic activities moving from the underground to the official sector. A detailed assessment of these estimates—together with possible refinements of the methodology and complemented by alternative approaches—can contribute to a better understanding of economic dynamics in Georgia.
54. This chapter compares the SDSestimates of the shadow economy with an alternative measure obtained using the demand-for-cash approach . The two sets of estimates are qualitatively consistent with each other, as both suggest that the share of the