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What is the main purpose of econometrics?
Econometrics is a combination of economics, mathematics, and statistics.
True
Who introduced the term 'econometrics'?
Ragnar Frisch
Econometric is the application of __________ to economic data in order to give empirical content to economic relationships.
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Match the following branches to form econometrics:
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What is the primary goal of econometrics?
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What does econometrics help us to know and decide?
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Which of the following can econometrics provide estimates for?
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What is econometrics concerned with in relation to economic activities?
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Why are estimates of coefficients in economic relations valuable for formulating economic policies?
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What does forecasting involve in relation to economic magnitudes?
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Study Notes
Introduction to Econometrics
- Econometrics is a branch of economics that discusses the measurement of relationships between economic variables.
- It is the application of statistical methods to economic data to give empirical content to economic relationships.
- Economic theories attempt to define the quantitative relationships between economic variables, which are often described in mathematical terms.
Meaning of Econometrics
- The term "econometrics" was introduced by Ragnar Frisch in 1926, modeled on the expression "biometric".
- Econometrics is a combination of economics, mathematics, and statistics that provides numerical values for parameters of economic relationships and verifies economic theories.
- The word "econometrics" is derived from "econo" (economics) and "metric" (measurement), indicating the measurement of economics.
Definition of Econometrics
- Different econometricians define econometrics in their own way, but it is generally understood as the integration of economics, mathematics, and statistics for the purpose of providing numerical values for parameters of economic relationships and verifying economic theories.
- According to Arthur S. Goldberger, econometrics is "the social science in which the tools of economic theory, mathematics, and statistical inference are applied to analyze the economic phenomena."
- According to Samuelson, Koopmans, and Stone, econometrics is "the quantitative analysis of actual economic phenomena based on current development of theory and observation, related to appropriate methods of inferences."
Methodology of Econometrics
- The methodology of econometrics involves eight steps:
- Statement of theory or hypothesis
- Specification of mathematical model of the theory
- Specification of the statistical or econometric model
- Obtaining the data
- Estimation of the parameters of the econometric model
- Hypothesis testing
- Prediction or forecasting
- Application of the model for control or policy purpose
Why is Econometric a Separate Discipline?
- Econometrics is a separate discipline because it integrates economic theory, mathematical economics, economics statistics, and mathematical statistics.
- It is a science of estimation of economic laws, providing numerical estimates to economic theory.
- Econometricians use mathematical equations proposed by mathematical economists and put them in a form that allows for empirical testing.
Objectives of Econometrics
- The three main objectives of econometrics are:
- Verification of economic theory or judging the validity of economic theory
- Estimation of coefficients of economic relations
- Forecasting the future value of economic magnitudes
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Description
This quiz covers the fundamentals of econometrics, a branch of economics that measures relationships between economic variables using statistical methods.
