What is econometrics?
Econometrics is the application of statistics to economics. The field has been around since the early 1900s, when it was first applied to the analysis of agricultural prices. Today, economists use econometric techniques to study everything from consumer demand to international trade.
In addition to studying the relationships among different variables, econometricians also try to predict future events based on past observations. This type of prediction is called forecasting. Forecasting is often done using mathematical equations known as econometric models. These models are usually linear, meaning that they assume that there is a direct relationship between two variables.
Merriam Webster Online
The application of statistical methods to the study of economic data and problems.
Wikipedia
Econometrics is the application of statistical methods to economic data in order to give empirical content to economic relationships. More precisely, it is “the quantitative analysis of actual economic phenomena based on the concurrent development of theory and observation, related by appropriate methods of inference”. An introductory economics textbook describes econometrics as allowing economists “to sift through mountains of data to extract simple relationships”. Jan Tinbergen is one of the two founding fathers of econometrics. The other, Ragnar Frisch, also coined the term in the sense in which it is used today.
A basic tool for econometrics is the multiple linear regression model. Econometric theory uses statistical theory and mathematical statistics to evaluate and develop econometric methods. Econometricians try to find estimators that have desirable statistical properties including unbiasedness, efficiency, and consistency. Applied econometrics uses theoretical econometrics and real-world data for assessing economic theories, developing econometric models, analysing economic history, and forecasting.
What is econometrics used for?
Econometrics is an important tool in economics. It helps us understand economic phenomena by using statistical methods.
Econometricians use statistics to analyze data collected from surveys, experiments, and other sources. They then use these results to develop theories about how the economy works. This allows them to predict trends and patterns in the economy.
Economists use econometrics to answer questions such as “How much does X cost?” and “What will happen when we do Y?” These answers help economists make decisions about what policies should be implemented. For example, if a government wants to reduce unemployment, it might implement programs that encourage businesses to hire more workers.
