The National Bank of Georgia continues its commitment to enhance its analytical communication with the public and is launching a new series of research papers titled Policy Papers. This series aims to review essential topics in central banking.

The first policy paper, titled "Shedding Light on Georgia's Neutral Interest Rate," examines and addresses key questions, including: How tight is the monetary policy stance? At what level will interest rates normalize in the long run once the cyclical factors in the economy dissipate? Under an inflation targeting framework, estimating the neutral rate is essential for addressing these questions. In the economic literature, the neutral rate is commonly defined as the equilibrium rate formed in the market when cyclical factors in the economy dissipate, output is at its potential, and inflation is maintained at the target level. This study reviews both domestic and international factors that influence the formation of the neutral rate in Georgia and evaluates its historical and current levels.

The Views expressed in the policy papers belong to the author(s) and should not be interpreted as reflecting the official position of the NBG.

The policy paper is available in the National Bank Publications section at the following address.