MODELING INFLATION DYNAMICS USING THE LOGISTIC MODEL: INSIGHTS AND FINDINGS

Rinela Kapçiu; Brikena Preni; Eglantina Kalluçi; Robert Kosova

doi:10.22437/jiituj.v8i1.32605

Authors

Rinela Kapçiu Aleksander Moisiu University of Durres
Brikena Preni Polytechnic University of Tirana
Eglantina Kalluçi University of Tirana
Robert Kosova Aleksander Moisiu University of Durres

DOI:

https://doi.org/10.22437/jiituj.v8i1.32605

Keywords:

Difference Equation, Dynamic Systems, Inflation Study, Logistic Equation, Stability

Abstract

This paper examines applying the logistic model, frequently used in biology, to analyze inflation patterns in dynamic economic systems. The primary objective is to simulate and analyze the complex dynamics of inflation, thus providing new insights into the stability of financial institutions. Numerical methods such as Euler's Method, Runge-Kutta Method (RK4), and Adams-Bashforth-Moulton's method were used to simulate inflation patterns by discretizing the logistic equation. The data utilized in this research were obtained from INSTAT, BoA, MoF, and Eurostat, with quarterly results from 1995 to 2023. The simulation results indicated that the RK4 and Adams-Bashforth-Moulton methods yielded more precise and reliable inflation forecasts than Euler's. The logistic model represented the non-linear aspects of inflation dynamics well, emphasizing the necessity of using suitable numerical approaches. The study's findings highlight the effectiveness of the logistic model in economic analysis, specifically in forecasting inflation trends. Enhanced closure approaches have proven their effectiveness in analyzing intricate economic data, providing crucial insights into the stability of inflation, and informing policy formulation. This study utilizes the logistic model to analyze inflation dynamics, offering a unique methodology for comprehending and forecasting inflation in economic systems. An analysis of several closure techniques reveals a novel aspect of financial modeling tools. The findings indicate that incorporating advanced numerical methods can significantly improve the precision of economic models. These findings significantly impact economic research and policy formulation, especially in devising measures to manage inflation and ensure financial stability.

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