Impact of Financial Development and Unemployment on Poverty in Uzbekistan's Digital Economy

The digital economy has become a driving force in changing the global economy, especially in developing countries such as Uzbekistan. However, the relationship between financial development, unemployment, and poverty in relation to the digital transformation in Uzbekistan is not well investigated. There is evidence that financial development and unemployment are vital factors that affect poverty. However, their relationships in relation to Uzbekistan’s digital economy are not discussed. Although existing research shows mixed relationships between these factors and poverty in other contexts, no research on the subject has been done. Hence, the research does not account for financial development and unemployment’s relationships in Uzbekistan or the country’s digital economy. This research paper fills this gap by investigating the impact of financial development and unemployment on poverty in Uzbekistan from 2000 to 2021 based on FDI and unemployment data. The results show that poverty is affected by its past rates. Hence, there is a poverty cycle. Financial development has no effect on reducing poverty. However, unemployment is negatively correlated with poverty. This relationship results in higher unemployment rates leading to a decrease in poverty in the short run. The study incorporates the digital economy into analyzing poverty and how financial development and unemployment results in the phenomenon. It also highlights the strong need to include financial inclusiveness and provision of employment, especially on digital platforms, in poverty reduction efforts in Uzbekistan. This research provides vital information for regulating policies to address poverty. It also provides new information for other scholars interested in related studies.