From plan to market price: inflation drivers in New Uzbekistan

Abstract

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.