The Political Economy of Geopolitical Risk and Fiscal Response in Georgia. A Mixed-methods Analysis

Abstract

This article examines the influence of geopolitical factors on economic and political decision-making in Georgia, employing a mixed-methods approach that combines econometric modelling and survey analysis. Utilizing quarterly data from 2012 to 2024, sourced from Geostat, the World Bank, and the Institute for Economics and Peace, the study employs an Ordinary Least Squares (OLS) regression model to examine how variables - including the Global Peace Index, political stability, inflation, GDP growth, unemployment, and external trade relations - affect government expenditure. Complementing these findings, an original survey of 350 respondents from Georgia's academic and research community provides qualitative insights into perceptions of geopolitical risk, economic development, and migration intentions. These findings contribute to the political economy literature by illustrating whether geopolitical risk reshapes fiscal governance and public expectations in transitional economies, thereby extending theories of fiscal responsiveness and international political economy to the small-state context.