UNCONVENTIONAL MONETARY POLICY AND INFLATION TARGETING IN EMERGING ECONOMIES: LESSONS FOR UZBEKISTAN
DOI:
https://doi.org/10.5281/zenodo.21154288Abstract
The post-pandemic inflationary surge of 2021–2023 forced central banks worldwide to reassess
the adequacy of their conventional and unconventional monetary policy toolkits. Advanced economies deployed
quantitative easing (QE), forward guidance (FG), yield curve control (YCC), and negative interest rate policies (NIRP)
on an unprecedented scale. For emerging and frontier economies such as Uzbekistan, which are simultaneously
pursuing a transition to inflation targeting (IT), the relevance of unconventional instruments represents both an
opportunity and a risk, while their empirical foundations remain underexplored.
Inflation expectations (β₄ = 0.634 in the long run, p < 0.001) and the policy interest rate (β₂ = −0.743 in the
long run, p < 0.001) are the dominant determinants of inflation in Uzbekistan. The exchange rate pass-through is
moderate (β₃ = 0.198). The comparative analysis shows that unconventional instruments are most effective in deep
financial markets and least transferable to shallow and dollarized economies. Full adoption of forward guidance
could reduce Uzbekistan’s inflation expectations gap by 1.5–2.5 percentage points.
The findings provide practical guidance for the Central Bank of Uzbekistan’s communication strategy, the
Ministry of Finance’s capital market development agenda, and commercial banks’ interest rate risk management
practices.
Keywords
unconventional monetary policy; inflation targeting; quantitative easing; forward guidance; yield curve control; inflation expectations; monetary transmission; Uzbekistan; emerging economies; New Keynesian Phillips Curve.References
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