Impact of Money Supply on Inflation in Uzbekistan—VAR Approach

Many scholars have examined the significance of the money supply for macroeconomics in developed countries. However, few studies have explored this assumption in developing countries. Therefore, this research presents the Vector AutoRegression (VAR) model for the developing countries. Within the econometric model, money supply, refinancing interest rate, money market rate, and inflation rates are obtained on a monthly basis. According to the analysis, while money supply and money market rates have significantly affected inflation, the effect of Central Bank refinancing effect on inflation was insignificant. Meanwhile, the inflation growth has partially increased money supply but increased money market rates and refinancing interest rates. Additionally, the increase in inflation in the previous months is negatively correlated with the inflation in the next month.