Econometrics
From Economypedia.com
Econometrics means ‘economic measurement’. Econometrics is that branch of economics, which consists of mathematical and statistical tools applied for study of economic variables.
Econometrics can effectively deal with various types of data, which are listed below.
- Time series data
- Pooled data
- Cross-sectional data
Pooled data is essentially a combination of cross-sectional data and time series data. Panel data (either micropanel or longitudinal) is again a specialized type of a pooled data. Panel data studies cross sectional units like a company or family, over time. In simple terms, econometrics is primarily involved with empirical verification of economic laws. Econometrics can analyze data from fields of business, economics and other social sciences. Combination of logic, experimentation and causality lends econometrics status of a scientific inquiry method. Econometric models are probabilistic or stochastic in nature. Classical linear regression model is cornerstone of discipline of econometrics. CLRM makes use of normal probability distribution and Guass Markov theorem.
In current days, emphasis on econometrics revolves around specification testing, model comparison, diagnostic comparison and formulation of ‘expectational’ variables. [Economic theories nowadays involve a high role of 'expectations'] [1] [2]
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[edit] Steps of econometric analysis
- Formation of hypothesis or theory statement
- Specification of concerned econometric model (to be used for testing hypothesis)
- Estimation of parameters of selected model
- Statistical inference verification
- Prediction
- Use of model for policy determination
Thus statistical inference is an integral part of econometrics. [3]
[edit] Econometrics some uses
Econometrics as an analytical tool is used in a wide variety of fields. Some of them are mentioned below.
- Exchange rate model estimation
- Empirical analysis of litigations
- Multivariate volatility modeling involving financial indices
- Antitrust investigations
- Market efficiency evaluation
- Time series analysis
- Real estate pricing
- Income distribution measurement
- Business valuation analysis via econometric methods
- Poverty measurement
- Consumer demand analysis
- Tax evasion estimation studies
- Pricing strategies
- Transport model studies
- Financial and investment strategy analysis
- Migration trend models
- Event studies
- Labor force participation studies
- Causality analysis [4]
[edit] See also
[edit] References
[edit] External links
- Article in Connection.cwru.edu
[edit] Further readings
- Article in Econometrics.org
