ECONOMETRICS

Econometrics



Econometrics

Introduction

This research paper discusses over two separate questions identifying development in correlation and regression statistical techniques. These techniques will be used to conduct and develop a relationship in context of the data extracted from the materials suggested. (Hayashi, 2000)

This research paper includes intensive statistical elements which would elaborate and support the outcome. This report is based on a case study base format which would include data extracted and devised through many references. All the data that is a part of this report is articificial and has no resemblance to any original data that is available (if it is).

This report has been divided into two separate sections. These sections are made up of a simple question which has to be critically reviewed and analysed. The software that has been used in calculating and deriving the results is Eviews. Eviews is a software which defines and provides correct and accurate measurement improvising on pure statistics. All the analysis of the data is performed in the empirical data research section of the report. (Eatwell & Milgate, 1990)

Several definitions of econometrics exist, a popular example being the following: “Econometrics is the study of the application of statistical methods to the analysis of economic phenomena.” The variety of definitions is due to econometricians wearing many different hats. First and foremost, they are economists, capable of using economic theory to improve their empirical analyses of the problems they address. At times they are mathematicians, formulating economic theory in ways that make it appropriate for statistical testing. At times they are accountants, concerned with the problem of finding and collecting economic data and relating theoretical economic variables to observable ones. At times they are applied statisticians, spending hours with the computer trying to estimate economic relationships or predict economic events. And at times they are theoretical statisticians, applying their skills to the development of statistical techniques appropriate to the empirical problems characterizing the science of economics. It is to the last of these roles that the term econometric theory applies, and it is on this aspect ofeconometrics that most textbooks on the subject focus. This chapter is accordingly devoted to this “econometric theory” dimension ofeconometrics, discussing the empirical problems typical of economics and the statistical techniques used to overcome these problems. (Baltagi, 2002)

Discussion

There are two main differences between econometrics and statistics. The first is that econometricians believe that economic data reflect strategic behavior by the individuals and firms being observed, and so they employ models of human behavior to structure their data analyses. Statisticians are less willing to impose this kind of structure, mainly because doing so usually is not fully consistent with the data. Econometricians ignore such inconsistencies, so long as they are not gross, to enable them to address issues of interest. The second difference stems from the fact that most economic data come from the real world rather than from controlled experiments, forcing econometricians to develop special techniques to deal with the unique statistical problems that accompany such ...