Modelling Inflationary Pressures Through Macroeconomic Indicators: An Applied Analysis Through Logistic Regression
Modelling Inflationary Pressures Through Macroeconomic Indicators: An Applied Analysis Through Logistic Regression

Author(s): Andreea-Mădălina BOZAGIU, Violeta Iluliana Enache
Subject(s): Social Sciences
Published by: Udruženje ekonomista i menadžera Balkana
Keywords: Inflation; Exchange rate; Macroeconomic; Logit and probit regression
Summary/Abstract: This study investigates the macroeconomic determinants of high inflation using unadjusted and adjusted logit and probit models, with validation tests confirming the robustness of the results. The findings highlight the output gap as a key predictor, with an odds ratio of 1.55 in the adjusted probit model, suggesting that a widening gap between actual and potential production significantly increases the likelihood of high inflation. The EUR/RON exchange rate emerges as another critical factor, with an inverse relationship to inflation (odds ratio ~0.88), emphasizing the importance of currency stability in mitigating inflationary pressures. Although less influential, the trade balance and unemployment rate also exhibit statistically significant effects, reflecting the role of external demand and labor market dynamics in shaping inflation trends. Model diagnostics, including the Hosmer-Lemeshow test and AUC, confirm a good fit and predictive accuracy. These findings provide actionable insights for policymakers to design coordinated fiscal and monetary strategies aimed at stabilizing inflation during economic instability.

• Details
• Contents