Monetary Policy Of The Central Bank In Ensuring National Currency Stability: Evidence From Uzbekistan And Comparative CrossCountry Analysis

Abstract

This article examines the mechanisms through which central bank monetary policy instruments sustain national currency stability, with particular attention to the transition economy of Uzbekistan. Using a qualitative-analytical framework that integrates the Taylor Rule, the Mundell-Fleming model, and institutional analysis, the study evaluates how inflation targeting, exchange rate management, reserve accumulation, and interest rate policy interact to preserve currency value under conditions of external and domestic shocks. The Central Bank of Uzbekistan (CBU) adopted a liberalized foreign exchange regime in 2017 and has since pursued a disinflation path from double-digit inflation toward a medium-term target of 5%. Comparative evidence from Kazakhstan, Georgia, Turkey, the Czech Republic, and Russia illustrates how the quality of monetary framework design-particularly central bank independence, communication credibility, and fiscal coordination-shapes the effectiveness of currency-stabilizing policies. The findings suggest that Uzbekistan has achieved meaningful disinflation progress, yet structural vulnerabilities-including elevated dollarization, narrow monetary transmission channels, and residual fiscal dominance—constrain the full realization of price and exchange rate stability. Policy implications address the sequencing of monetary reform, macroprudential complementarity, and the conditions under which greater exchange rate flexibility may be safely pursued.