THE EFFECT OF MACROECONOMIC FACTORS ON FINANCIAL STABILITY: EVIDENCE FROM UZBEKISTAN

Abstract

This study examines the impact of key macroeconomic factors: inflation, real interest rate, and commodity price volatility on financial stability in Uzbekistan during 2013-2024. Financial stability is proxied by the credit-to-GDP ratio, and the analysis applies a multiple linear regression model with heteroskedasticity-robust (HC3) standard errors. Data were sourced from the World Bank, IMF, and the World Bank’s Pink Sheet Commodity Price Data.
The results indicate that the real interest rate has a positive and statistically significant effect on financial stability, suggesting that tighter monetary policy enhances credit discipline and risk management. In contrast, inflation and commodity price volatility are statistically insignificant but follow the expected theoretical directions. These findings are consistent with the Central Bank of Uzbekistan’s Financial Stability Report (2024), which highlights that monetary tightening improved banking sector resilience while moderating credit growth.
The study concludes that Uzbekistan’s financial stability is mainly influenced by prudent monetary policy and institutional reforms, while external vulnerabilities persist through commodity dependence. It recommends strengthening macroprudential tools, deepening financial markets, and promoting economic diversification to ensure long-term financial stability.