Econometrics is the application of statistical methods to the quantification and critical assessment of hypothetical economic relationships using data. It is with the aid of econometrics that we discriminate between competing economic theories and put numerical clothing onto the successful ones. Econometric analysis may be motivated by a simple desire to improve our understanding of how the economy works, at either the microeconomic or macroeconomic level, but more often it is undertaken with a specific objective in mind. In the private sector, the financial benefits that accrue from a sophisticated understanding of relevant markets and an ability to predict change may be the driving factor. In the public sector, the impetus may come from an awareness that evidence-based policy initiatives are likely to have the greatest impact.
It is now generally recognized that nearly all professional economists, not just those a Continue reading “What is econometrics, and why study it?”
[Note: Begin your study of this chapter by reading the Overview section below. Then read the corresponding chapter in the textbook, view the corresponding slideshows on the website, and do the starred exercises. Do the additional exercises in the subject guide. Check the answers to the exercises. Finally, check that you have attained all the learning outcomes listed below.]
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