Inflation Rate Modelling in Indonesia

Abstract

The purposes of this research were to analyse: (i) Modelling the inflation rate in Indonesia with parametric regression. (ii) Modelling the inflation rate in Indonesia using non-parametric regression spline multivariable (iii) Determining the best model the inflation rate in Indonesia (iv) Explaining the relationship inflation model parametric and non-parametric regression spline multivariable. Based on the analysis using the two methods mentioned the coefficient of determination (R²) in parametric regression of 65.1% while non-parametric amounted to 99.39%. To begin with, the factor of money supply or money stock, crude oil prices and the rupiah exchange rate against the dollar is significant on the rate of inflation. The stability of inflation is essential to support sustainable economic development and improve people's welfare. In conclusion, unstable inflation will complicate business planning business activities, both in production and investment activities as well as in the pricing of goods and services produced.

DOI: 10.15408/etk.v15i2.3260