ISET Khachapuri Index - ISET Policy Institute by linxiaoqin

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									ISET Khachapuri Index
                 Inspiration

• Aim - design a way of tracking inflation using
  the simplest and the most robust consumer
  basket that would appeal to everybody.
                    Inspiration
• “Big Mac Index” of The Economist.
     • This particular index is used to measure the purchasing
       power parity between any two countries by comparing
       the price of a "standard" good – the Big Mac
       hamburger – that is identical across countries


• Similar index – but to trace inflation and the
  cost of living
            Why Khachapuri?
• “The most common meal in Georgia?”-
  Khachapuri

• The pride of local cuisine

• Produced and consumed by practically every
  family regardless of its ethnicity
       Khachapuri Index usage
• Analytical purposes:
  – Cost of living across space and time
  – Changes in the terms of trade
  – Impact of global commodity prices
  – Seasonal fluctuations in demand
  – Seasonal fluctuations in agricultural supply
  – Market structure
Kh-Index “Basket”
                                Price of Energy
Cheese             Yeast
                               (gas, electricity)

 Butter            Eggs


 Flour             Milk



          • Cons
            – exclusion of other important
              consumer goods
          • Pros
            – Simplicity
            – Transparency
            Kh-Index Methodology
• First Tbilisi Survey - August 2008
   – Three major open markets in Tbilisi (so called “Bazari”)


                                                  • May 2011 - survey
                                                    expanded:
                                                     • Kutaisi
                                                     • Batumi
              Kutaisi   Gori
                                                     • Telavi
   Batumi
                               Tbilisi   Telavi
      Index compilation method
• Interview 5 sellers of every item in the
  Khachapuri basket
• Calculate the average cost of cooking one
  portion of Khachapuri in different cities
• Calculate the minimum and maximum prices of
  one Khachapuri portion
   Index Calculation Techniques
• Calculate following indices for each city
  and the country as a whole:
  – Khachapuri Index (Kh-Index)

  – Frugal Housewife Khachapuri Index

  – Monthly Kh-Index inflation

  – Annual Kh-Index inflation
                 Explanatory Power
                  Kh-Index vs. CPI
130


120


110


100


 90


 80


 70


 60




      Regular Khachapuri Index   Regular CPI Index (renormalized)
               Explanatory Power
150
              Kh-Index vs. Food CPI
140

130

120

110

100

 90

 80

 70

 60




      Regular Khachapuri Index   Food CPI Index (renormalized)
      Frugal Housewife Kh-Index
      How much can frugal wife save by looking for the cheapest ingredients
40%

35%

30%

25%

20%

15%

10%

5%

0%




              Tbilisi        Batumi           Kutaisi         Telavi
      Kh-Index comparing cost of living
       Geographic variation in Kh-Index and the number of
      Khachapuri portions a family could cook in September
                               2012
260     3.25            3.23                                    3.3
240
                                      3.17                      3.2
220
200                                                             3.1
180
        250
160                      230          223              2.95     3

140                                                    180      2.9
120
100                                                             2.8

       Tbilisi         Adjara       Imereti           Kakheti

                 # of Khachapuri   Khachapuri Price
   Khachapuri and The Economist Pancake
                   Index
                           Cost of (130) Pancake ingredients (USD)
                   0   2     4    6    8    10   12   14   16   18   20      22   24   26   28

         Japan
  Hong Kong
 Switzerland
      Norway
   Singapore
           Italy
        France
    Australia
       Ireland
         China                                                            Butter (500 g)
         Brazil
    Germany                                                               White flour (1kg)
        Britain
  Philippines
United States                                                             Milk (2 liters)
      Georgia
 Netherlands                                                              Egg (20)
     Armenia
  Azerbaijan
          India
       Kh-Index in The Financial
          http://www.financial.ge/pdf/ePaper.pdf

• Since June 2011 - Kh-Index column in The
  Financial on a weekly basis


• 63 column published

• Two main sections in each:
  – Kh-Index analysis
  – “Economic lesson of the week”
           Economic lessons of the week
      • Labor migration and remittances to Georgia
       Remittances to Georgia: percent of GDP                                  Remittances to Georgia: mln USD
10%                                                9.0%   8.8%   1,400                                                         1,268
                              8.5%
9%                                                               1,200                                   1,002         1,052
                                     7.8%   7.8%
                       7.1%                                      1,000                             866           842
8%
                6.3%                                              800
7%                                                                                           553
                                                                  600                  403
6%       5.1%                                                     400            259
                                                                         197
5%                                                                200
4%                                                                  0
  2003   2004   2005   2006   2007   2008   2009   2010   2011           2003 2004 2005 2006 2007 2008 2009 2010 2011



      • Farmer cooperation, the Nikozi experiment
        assessed
                                        Economic lessons of the week
                              • No money, no venture, no
                                gain in Georgia’s agriculture
                              • Georgian driving manners and
                                economic competitiveness
                                                 Road Traffic Accidents, Georgia, 2001-2011
                             10,000                                                                                      8,000
Persons killed and injured




                                                                                                                                 Number of road traffic accidents
                              9,000                                                                                      7,000
                              8,000
                                                                                                                         6,000
                              7,000
                              6,000                                                                                      5,000

                              5,000                                                                                      4,000
                              4,000                                                                                      3,000
                              3,000
                                                                                                                         2,000
                              2,000
                              1,000                                                                                      1,000

                                 -                                                                                       -
                                       2001   2002    2003   2004    2005      2006   2007   2008   2009   2010   2011

                                      Total number of road traffic accidents          Persons injured       Persons killed
                        Economic lessons of the week
• IMF monetary policy prescriptions in action

30%
                        Annual inflation rates in Georgia, Armenia and Azerbaijan converge over
                                                     time (2008-12)
25%

                                                                      Azerbaijan
20%


15%                                                                                                                        Georgia
10%
                                                                              Armenia
5%


0%


-5%
                                 Jul-08




                                                                                       Jul-09




                                                                                                                                             Jul-10




                                                                                                                                                                                                   Jul-11
                        May-08


                                          Sep-08




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                                                                                                                                                                                          May-11


                                                                                                                                                                                                            Sep-11
                                                   Nov-08




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      Jan-08
               Mar-08




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                                                                                                                                                                                 Mar-11




                                                                                                                                                                                                                              Jan-12
                                                                                                                                                                                                                                       Mar-12
        Economic lessons of the week
 • How rich Georgia really is?
 GEORGIA’S REGIONS AND COUNTRIES WITH SIMILAR LEVELS OF INCOME PER
                             CAPITA
Georgia’s regions            GDP per capita   Comparator countries   GDP per capita
                                 (USD)                                   (USD)
Tbilisi                          4088         Albania                    4131
Adjara                           1980         Moldova                    2021
Kvemo Kartli                     1705         Papua New Guinea           1712
Imereti                          1660         Papua New Guinea           1712
Racha Lechkhumi K. Svaneti       1660         Papua New Guinea           1712
Samegrelo Z. Svaneti             1598         Ghana                      1588
Guria                            1521         India                      1527
Shida Kartli                     1494         Yemen                      1460
Mtskheta Mtianeti                1494         Yemen                      1460
Samtskhe Javakheti               1483         Djibouti                   1500
Kakheti                          1344         Zambia                     1355
    Economic lessons of the week
• Are Georgian village communities able to
  organize themselves?

•                       The Case Of Shrosha
Thank you

								
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