From plan to market price: inflation drivers in New Uzbekistan
DOI:
https://doi.org/10.35551/PFQ_2025_3_2Keywords:
ARDL, inflation, money, Uzbekistan, E44, E52, E58Abstract
This study analyzes the drivers of inflation in new phase of economic development after 2017 liberalization. Applying the Autoregressive Distributed Lag (ARDL) approach, the research examines the relationships among monetary, non-monetary and external factors of inflation between October 2017 and May 2025. The findings revealed that money and producer price index (PPI) had significant impact on inflation in the long run. Short-run results showed strong inflation inertia and PPI had a statistical significant effect on CPI in the short run. The study also identified unidirectional causality from broad money to consumer price index (CPI) and from PPI to CPI with Toda and Yamamoto causality test. These insights are crucial for policymakers aiming to address inflationary pressures and promote long-term economic stability in Uzbekistan. Central Bank of Uzbekistan (CBU) should maintain monetary tightening to control monetary drivers of inflation during the liberalization. Limiting role of state and eliminating trade tariffs foster greater competition, thereby helping to control cost-push inflation.
References
Abu Asab, N., (2025). Are supply shocks a key driver of global inflation? Evidence from CPI and GDP deflator analysis. Research in Globalization, 10, 100279.
Aisen, A., Manguinhane, E., & Simione, F. F. (2021). An empirical assessment of the exchange rate pass-through in Mozambique. International Monetary Fund.
Akimov, A. (2001). Reforming the Financial System; The Case of Uzbekistan. CASE Network Studies and Analyses, (234).
Al Rasasi, M., Cabezon, E. (2022). Uzbekistan’s Transition to Inflation Targeting. IMF Working Papers, 229, pp. 1-24.
Alam, M.Q. and Alam, M.S. (2016). The determinants of inflation in India: The bounds test analysis. International Journal of Economics and Financial Issues, 6(2), pp.544-550.
Alper, A. E., Alper, F. O., Ozayturk, G., & Mike, F. (2022). Testing the long-run impact of economic growth, energy consumption, and globalization on ecologi-cal footprint: new evidence from Fourier bootstrap ARDL and Fourier bootstrap Toda–Yamamoto test results. Environmental Science and Pollution Research, 1-16.
Amisano, G. and Fagan, G. (2013). Money growth and inflation: A regime swit-ching approach. Journal of International Money and Finance, 33, pp.118-145.
Babasyan, D., Gu, Y., & Melecky, M. (2023). Late banking transitions: Comparing Uzbekistan to earlier reformers. World Development Perspectives, 30, 100493.
Baranov, A. O., & Somova, I. A. (2015). Analysis of main factors of inflation dyna-mics in post-Soviet Russia. Studies on Russian Economic Development, 26, 110-123.
Budina, N., Maliszewski, W., De Menil, G., & Turlea, G. (2006). Money, inflation and output in Romania, 1992–2000. Journal of International Money and Finan-ce, 25(2), 330-347.
Bui, T. T., & Kiss, D. G. (2021). Measuring monetary policy by money supply and interest rate: evidence from emerging economies. Review of Economic Perspec-tives, 21(3), 347-367.
Catao, L.A. and Terrones, M.E., 2005. Fiscal deficits and inflation. Journal of Mo-netary Economics, 52(3), pp.529-554.
Corbo, V. and Di Casola, P. (2022). Drivers of consumer prices and exchange rates in small open economies. Journal of International Money and Finance, 122, p.102553.
Deka, A. and Dube, S. (2021). Analyzing the causal relationship between exchange rate, renewable energy and inflation of Mexico (1990–2019) with ARDL bounds test approach. Renewable Energy Focus, 37, pp.78-83.
Diaz, E. M., Cunado, J., & de Gracia, F. P. (2024). Global drivers of inflation: The role of supply chain disruptions and commodity price shocks. Economic Model-ling, 140, 106860.
Engle, R. F., & Granger, C. W. (1987). Co-integration and error correction: repre-sentation, estimation, and testing. Econometrica: journal of the Econometric Soci-ety, 251-276.
Friedman, M., & Schwartz, A. J. (1963). A monetary history of the United States, 1867–1960. Princeton University Press.
Hoggarth, G. (1996). Monetary policy in Russia. Russia’s Financial Markets and the Banking Sector in Transition’, Bank of Finland Studies A, 95, pp.53-82.
International Monetary Fund. (2024). Republic of Uzbekistan: 2024 Article IV Consultation-Press Release; and Staff Report.
Isakova, A. (2007). Modeling and forecasting inflation in developing countries: The case of economies in central Asia. Center for Economic Research and Graduate Education, Discussion Paper, (2007-174).
Ismailov, A. (2023). Urgent issues of regulation of money supply in the conditions of transition to the inflation targeting regime in Uzbekistan. Economics & Educa-tion, 24(2), pp. 53-57.
Johansen, S. (1988). Statistical analysis of cointegration vectors. Journal of econo-mic dynamics and control, 12(2-3), 231-254.
Karki, D. and Risal, H.G. (2020). Asymmetric impact of oil price on inflation: Evi-dence from Nepal. NRB Economic Review, 31(1), pp.21-46.
Kayamo, S. E. (2021). Asymmetric impact of real exchange rate on inflation in Ethiopia: a non-linear ARDL approach. Cogent economics & finance, 9(1), 1986931.
Koen, V, and M Marrese. (1995). Stabilization and Structural Change in Russia, 1992-1994. IMF Working Paper, WP 95/13. International Monetary Fund.
Korhonen, I. (1998). An error-correction model for prices. Money, Output and in-terest rate in Russia, Bank of Finland, Review of Economies in transition, 5, pp.33-44.
Kuma, B. and Gata, G. (2023). Factors affecting food price inflation in Ethiopia: An autoregressive distributed lag approach. Journal of Agriculture and Food Re-search, 12, p.100548.
Lim, M.G. and Papi, M.L. (1997). An econometric analysis of the determinants of inflation in Turkey. International Monetary Fund.
Lissovolik, M.B. (2003). Determinants of inflation in a transition economy: The case of Ukraine. IMF Working Paper, WP 03/126. International Monetary Fund.
Loungani, P. and Swagel, P. (2001). Sources of inflation in developing countries. IMF working paper series N-01/198
Majidov T. (1999) “Central Banking in Transition Countries”, Dissertation in par-tial fulfilment of Msc in Banking and Finance, Department of Economics, Uni-versity of Stirling, Stirling.
Mohanty, M.S. and Klau, M. (2001). What determines inflation in emerging mar-ket economies? BIS Papers, 8, pp.1-38.
Moriyama, M. K. (2008). Investigating inflation dynamics in Sudan. International Monetary Fund.
Nasir, M. A., Huynh, T. L. D., & Vo, X. V. (2020). Exchange rate pass-through & management of inflation expectations in a small open inflation targeting eco-nomy. International Review of Economics & Finance, 69, 178-188.
Nikolić, M. (2000). Money growth–inflation relationship in post-communist Russia. Journal of Comparative Economics, 28(1), 108-133.
Nogueira Junior, R. P. (2007). Inflation targeting and exchange rate pass-through. Economia Aplicada, 11, 189-208.
Osorio, C. and Unsal, D.F. (2013). Inflation dynamics in Asia: Causes, changes, and spillovers from China. Journal of Asian Economics, 24, pp.26-40.
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of applied econometrics, 16(3), 289-326.
Ringwald, L. and Zörner, T.O. (2023). The money-inflation nexus revisited. Jour-nal of Empirical Finance, 73, pp.293-333.
Sankaran, A., Kumar, S., Arjun, K., & Das, M. (2019). Estimating the causal re-lationship between electricity consumption and industrial output: ARDL bounds and Toda-Yamamoto approaches for ten late industrialized countries. He-liyon, 5(6).
Siliverstovs, B., & Bilan, O. (2005). Modeling inflation dynamics in transition eco-nomies: The case of Ukraine. Eastern European Economics, 43(6), 66-81.
Toda, H. Y., & Yamamoto, T. (1995). Statistical inference in vector autoregressions with possibly integrated processes. Journal of econometrics, 66(1-2), 225-250.
Valogo, M.K., Duodu, E., Yusif, H. and Baidoo, S.T. (2023). Effect of exchange rate on inflation in the inflation targeting framework: Is the threshold level rele-vant? Research in Globalization, 6, p.100119.
Ybrayev, Z., Shamar, B., & Mamatova, K. (2024). Domestic inflation decomposi-tion in a small open economy: Evidence from import price dynamics in Kazakh-stan. Central Bank Review, 24(4), 100179.
Yılmaz, E., & Bulut, N. (2025). Inflation dynamics: Profits, wages and import prices. Economic Systems.
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Public Finance Quarterly
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors assign copyright to Pénzügyi Szemle / Public Finance Quarterly. Authors are responsible for permission to reproduce copyright material from other sources.
