Impact of Monetary Policy Sustainability Indicators on Economic Growth in Transition to Inflation Targeting

Abstract

The article presents economic aspects of moving to inflation targeting regime. Foreign experience in transition to inflation targeting has been studied empirically. The impact of Uzbekistan's monetary policy stability indicators on economic growth was also investigated by using four criteria from the 4x2 matrix model in 2011-2020. Based on obtained results, the Phillips-Perron and extended Dickey-Fuller tests are used to determine whether variables are stationary or not. The long-term correlation between the variables is checked using the Johansen cointegration test. The results show that increases in bank capital adequacy, loan portfolio, and money supply, as well as lower inflation, all help to maintain macroeconomic stability. However, rising volume of bank deposits and appreciation of foreign currency against Uzbek sum has a negative impact on economic growth. In addition, liquidity ratio, state gold and foreign exchange reserves are insignificant and have no effect on economic growth.