THE INTERRELATIONSHIP BETWEEN MACROECONOMIC STABILITY AND FINANCIAL MARKET DEVELOPMENT IN UZBEKISTAN: AN EMPIRICAL ANALYSIS

This study empirically investigates the dynamic interrelationship between macroeconomic stability and financial market development in Uzbekistan. Utilizing quarterly time-series data from 2000 to 2023, the research employs a Vector Error Correction Model (VECM) approach, alongside cointegration and Granger causality tests, to uncover both long-run equilibrium relationships and short-run dynamics. Our findings reveal a significant bidirectional causality between key indicators of macroeconomic stability (e.g., inflation, GDP growth) and financial market depth (e.g., stock market capitalization, private credit). Specifically, robust financial markets contribute to greater macroeconomic resilience, while stable macroeconomic conditions foster deeper and more efficient financial intermediation. Impulse response functions indicate that positive shocks to financial market development lead to sustained improvements in macroeconomic stability, and vice versa. These insights offer critical policy implications for Uzbekistan, emphasizing the synergistic benefits of integrated policy frameworks that simultaneously target financial sector reforms and macroeconomic stabilization efforts to achieve sustainable economic growth.