Piecewise regression model is one of a regression method that is used to solve the nonlinear patterns of

data. Piecewise regression combines two or more segments of regression models where the point that
connects the segments is called Breakpoint. In this Linear Piecewise regression, every segment of model
is estimated by the Least Square Method. In order to make the breakpoint of Piecewise model is
optimum it is known by the result of Marquardt Iteration Method based on the smallest Mean Squares
Error.

The data used in this research are the amount of circulating money and the rate of inflation from
January 2010 until December 2013 as its predictors and responses variable. Based on the criteria of R2
each of the first, second and third data segments are able to explain the factual condition by 77.6%,
85.56% and 78.92%. At the second segment, the regression model has a contradiction with the theory of
Quantity of Money said by Irving Fisher. It is caused by another variable affected the rate of inflation.
SAS 9.3 and Eviews 6 are the software used in this research.

Keyword: regression, Least squares method, marquardt, segment, piecewise, breakpoint