Modeling the Inflation Rate in Algeria for the Period 1980–2023 Using Multiple Linear Regression: A Comparison Between Classical (OLS) and Bayesian Estimation

Abstract

In this study, we aimed to investigate the determinants of inflation in Algeria over 1980–2023 using multiple linear regression (MLR). The independent variables included the real exchange rate (Dinar/USD), changes in oil prices, the real interest rate, and the change in the export-to-GDP ratio. In contrast, the dependent variable was the change in the inflation rate. The parameters of the specified model were estimated using the Ordinary Least Squares (OLS) method and the Bayesian estimation approach. The purpose was to examine whether the estimates obtained through both methods converge to similar values. The findings indicated a convergence of results between the two estimation techniques.