Handout MAAE507-1.pdf - MAAE 507: Econometrics Lecture 1...

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MAAE 507: EconometricsLecture 1Handout MAAE507-1Dr Emmanuel Mwakiwa1
Data analysisGroup differencesTrend analysis2
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What is econometrics (1 of 2)Economic measurementthe result of a certain outlook on the role of economics,consists of the application of mathematical statistics toeconomic data to lend empirical support to the modelsconstructed by mathematical economics and to obtainnumerical resultsthe quantitative analysis of actual economicphenomena based on the concurrent development oftheory and observation, related by appropriatemethods of inferencethe social science in which the tools of economictheory, mathematics, and statistical inference areapplied to the analysis of economic phenomenais concerned with the empirical determination ofeconomic laws5
What is econometrics (2 of 2)The art of the econometrician consists in finding theset of assumptions that are both sufficiently specificand sufficiently realistic to allow him to take thebest possible advantage of the data available to himThe method of econometric research aims,essentially, at a conjunction of economic theory andactual measurements, using the theory andtechnique of statistical inference as a bridge pier6
Econometrics a combination of disciplineseconometrics is an amalgam ofeconomic theory,mathematical economics,economic statistics, andmathematical statistics7
Econometrics & economic theoryEconomic theory makes statements or hypotheses thatare mostly qualitative in nature. e.g.microeconomic theory states that, other things remainingthe same, a reduction in the price of a commodity isexpected to increase the quantity demanded of thatcommodity.But the theory itself does not provide any numericalmeasure of the relationship between the twoi.e., it does not tell by how much the quantity will go up ordown as a result of a certain change in the price of thecommodity.The econometrician provides such numerical estimateseconometrics gives empirical content to most economictheory8
Econometrics & mathematical economicsmain concern of mathematical economics is toexpress economic theory in mathematical form(equations) without regard to measurability orempirical verification of the theory.Econometrics is mainly interested in the empiricalverification of economic theory.The econometrician often uses the mathematicalequations proposed by the mathematical economistbut puts these equations in such a form that theylend themselves to empirical testing.9
Econometrics & economic statisticsEconomic statistics is mainly concerned withcollecting, processing, and presenting economicdata in the form of charts and tables.economic statistician is primarily responsible forcollecting data on gross national product (GNP),employment, unemployment, prices, etc.

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