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Understanding Econometrics Methodology

Econometrics combines mathematical and statistical tools to analyze economic data. It involves stating a theory, specifying models, obtaining data, estimating parameters, testing hypotheses, forecasting, and using models for policy purposes. Data can be time series data collected over time on variables like GNP or unemployment, cross section data from different entities at a point in time, or pooled data combining time series and cross section approaches.

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5 views2 pages

Understanding Econometrics Methodology

Econometrics combines mathematical and statistical tools to analyze economic data. It involves stating a theory, specifying models, obtaining data, estimating parameters, testing hypotheses, forecasting, and using models for policy purposes. Data can be time series data collected over time on variables like GNP or unemployment, cross section data from different entities at a point in time, or pooled data combining time series and cross section approaches.

Uploaded by

hussain200055
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

ECONOMETRICS

Econometrics is the combination of mathematical theory and its application with statistical tools.

METHODOLOGY OF ECONOMETRICS

1. Statement of theory or hypothesis

2. Specification of the mathematical model of the theory

3. Specification of the statistical, or econometric, model

4. Obtaining the data

5. Estimation of the parameters of the econometric model

6. Hypothesis testing

7. Forecasting or prediction

8. Using the model for control or policy purposes.

DATA

It is a specified fact collected from the market.

TYPES OF DATA

i. Time series Data


ii. Cross section Data
iii. Pooled Data

I. TIME SERIES DATA

 Collected over time period


 Like GNP, Employment, Unemployment etc.
 May be Quantitative (Price, Income, Supply)
 May be Qualitative (Male & Female, Working & Not Working etc.)
 May be collected at regular intervals
 Daily (Stock Prices)
 Weekly (Money supply)
 Monthly (Unemployment Rate)
 Annually (Gov.t Budget)

II. CROSS SECTION DATA

 Collecting data from different entities


 On same time
 e.g. (Income statement of 10 firms in Pakistan)
iii. Pooled Data

 Combination of Time series & Cross section


 e.g. Inflation rate of 10 countries for 20 years

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