THE IMPACT OF CAPITAL FLOWS ON THE MONETARY POLICY OF THE REPUBLIC OF UZBEKISTAN AND ITS ANALYSIS

Mamadjonov Farrux Gayratovich

Authors

Mamadjonov Farrux Gayratovich Independent Researcher, Department of Economics, Namangan State Technical University

Keywords:

monetary policy, capital flows, foreign direct investment, remittances, inflation targeting, exchange rate, Central Bank of Uzbekistan, M2 money supply, external debt.

Abstract

This article econometrically analyses the impact of capital flows — foreign direct investment (FDI), remittances, portfolio investments, and external debt — on the monetary policy of the Central Bank of Uzbekistan, based on quarterly panel data for 2016–2024. Using an OLS multiple regression model, quantitative relationships are estimated between monetary indicators — inflation, policy rate, M2 money supply growth, credit-to-GDP ratio, and exchange rate — and capital flows. The results show that remittances have a significant positive effect on lending volume (β = 0.475, p < 0.001) and money supply expansion; FDI inflows demonstrate a negative relationship with inflation (β = −0.312, p < 0.05); and external debt is identified as a risk factor for monetary stability (β = −0.210, p < 0.05). The model explains 89.1% of the variance (R² = 0.891). The study concludes with practical recommendations on transitioning the Central Bank of Uzbekistan to an inflation targeting regime, regulating capital flows, and ensuring exchange rate stability.

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