ABSTRACT
Chapter 2 engages with the existing literature on dollarization, with a special focus on theoretical explanations for dollarization persistence, and introduces the methodological framework of the book. After reviewing the academic debate, gaps are identified both in terms of empirical research and methodological approaches. As dollarization has mostly been studied by economists, the literature is rather economistic. The phenomenon is analysed in pure economic terms in relation with macroeconomic and financial stability, where the level and trends of inflation has a key explanatory power. Yet, the empirically proved persistence of dollarization remains an unresolved puzzle in this very literature. Furthermore, the history of dollarization remains under-researched.
In order to overcome these gaps, the chapter introduces a political economic approach to dollarization and conceptualizes the phenomenon through peripheral state theory, where the state is both a structure and an agent. After presenting the relational state approach and its premises in Regulation and Dependency schools, the concept of peripheral financialization is introduced to outline the embeddedness of peripheral states in the global power structure and to explore the links between this process and dollarization. Moreover, Georgia is understood as a hybrid state, whereas hybridity is conceptualized on the verge of Soviet legacies and transition imperatives. Most importantly, this chapter develops five key analytical categories which guide the analysis in the rest of the book: political society, civil society, accumulation regime, governance technologies, and international actors.
