EVALUATING THE IMPACT OF DIGITAL CURRENCY INTEGRATION IN COMMERCIAL BANKS ON TRANSACTION EFFICIENCY AND LIQUIDITY: ECONOMETRIC EVIDENCE FROM UZBEKISTAN
Keywords:
Keywords: Digital currency integration; Central Bank Digital Currency (CBDC); transaction efficiency; bank liquidity; System-GMM; panel data; Uzbekistan; digital som; financial technologyAbstract
This study investigates the mechanisms through which digital currency integration affects transaction efficiency and liquidity management in Uzbekistan's commercial banking sector. Against the backdrop of the Central Bank of the Republic of Uzbekistan's (CBU) pilot initiative for a digital som (UZS-D), this research employs a balanced panel dataset covering 23 licensed commercial banks over the period 2018–2023 (138 bank-year observations). Using a two-step System Generalized Method of Moments (System-GMM) estimator to address endogeneity and unobserved heterogeneity, supplemented by fixed-effects panel regressions and a Difference-in-Differences (DiD) design exploiting the phased rollout of digital payment infrastructure, we find that a one-standard-deviation increase in the Digital Currency Integration Index (DCII) — a composite measure capturing mobile payment adoption, real-time gross settlement (RTGS) utilization, and API connectivity — is associated with a statistically significant 14.7 percentage-point reduction in average transaction processing time, a 9.3 percentage-point improvement in the liquidity coverage ratio (LCR), and a 6.8 percentage-point decrease in non-performing loan (NPL) ratios. Heterogeneity analysis reveals that state-owned banks gain disproportionately larger liquidity benefits, while private banks exhibit superior transaction efficiency gains. Robustness checks including instrumental variable (IV) estimation, propensity score matching (PSM), and placebo regressions confirm the main findings. The results offer actionable policy guidance for the CBU, the Ministry of Finance, and banking regulators navigating Uzbekistan's digital financial transformation.
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