Statistics of Economics

# Statistics of Economics - Statistics of Economics Chapter 1...

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Statistics of Economics: Chapter 1: Terms: Econometrics- the social science in which the tools of economic theory, mathematics, and statistical inference are applied to the analysis of economic phenomena. Mathematical economics- express economic theory in mathematical form or equations without regard to measurability or empirical verification of the theory. Timer series data- collected over a period of time such as data on GDP, employmentm, unemployment money supply, or government deficits. Qualitative variables- called dummy or categorical variables Cross sectional data- data on one or more variables collected at one point in time, such as a consensus Pooled data- mixture of both cross sectional and Time series data Panel/micropanel/longitudinal data- a type of pooled data in which the same cross sectional unit is surveryed over time. Error term- defined as u in the ened of an equation to represent all those forces that may affect y but are not explicityly introduced in the model as well as purely random forces. Linear regression model- explains the behavior of the dependent variable in relation the behavior of one of more other explanatory variables Dependent variable- variable on the left hand side of the equation Independent variable- variable on the right side of the equation Hypothesis testing- finding out whether the estimated model makes economic sense and whether the results obtained conform with the underlying economic theory. Key Ideas: -econometrics is the application of mathematical statistics to economic data to lend empirical support to the models contructed by mathematical economics to obtain numberical results. -Econometric Analysis consists of the following things: 1. Creating a statement of theory or hypothesis 2. Collecting data 3. Specifying the mathematical model of theory 4. Specifying the statistical, or econometric, model of theory. 5. Estimating the parameters of the chosen econometric model. 6. Checking for model adequacy: Model specification testing 7. Testing the hypotheswis derived from the model 8. Using the model for prediction or forecasting -There are three types of data available for empirical analysis 1. Time series 2. Cross Sectional 3. Pooled (Combination of both) -in the equation y= a + bx: a and b are parameters where b is the slope which measures the rate of change in y for a unit change in x. - ^ on top of a variable means it’s an estimate

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Chapter 2: Terms: Statistical or random experiment- any process of observation or measurement that has more than one possible outcome and for which there is uncertainty about which outcome will actually materialize. Sample space or population- the set of all possible outcomes Event- a particular collection of outcomes and is thus a subset of the sample space Mutually exclusive- events are mutually exclusive if the occurrence of one event prevents the occurrence of another event at the same time Equally likely- Two events are said to be equally likely if we are confident that one event is as likely to occur as the other event
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