# econometrics

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## Econometrics

The quantitative science of modelling the economy. Econometric models help explain and predict variables of interest.

## Econometrics

The use of mathematics to assess economic data. There are two broad subdivisions in econometrics. Theoretical econometrics uses statistics to find strengths or weaknesses of an economic model considered on its own terms. Applied econometrics, on the other hand, considers how well a model conforms to real life data. For example, one may look at average wages for those with different levels of education to determine whether or not higher education is cost effective.

## econometrics

the application of statistical techniques in the analysis of economic data. Econometrics is used extensively in establishing statistical relationships between, for example, levels of national income and consumption in the economy, as a basis for formulating government ECONOMIC POLICY, and is used by firms to forecast demand for their products. See SALES FORECASTING, REGRESSION ANALYSIS.

## econometrics

the discipline within economics that attempts to measure and estimate statistically the relationship between two or more economic variables. For example, economic theory suggests that consumption expenditure is a function of disposable income (C = f (Y)) or, more precisely, that consumption expenditure is linked to disposable income through the equation C = a + b.Y. For each level of disposable income, consumption can be measured and a statistical relationship established between the two variables by making numerical estimates of the parameters, a and b in the equation. Because consumption is dependent upon income, it is termed the DEPENDENT VARIABLE, whilst disposable income is termed the INDEPENDENT VARIABLE. Econometric models can have many hundreds of measured variables, linked by several hundred estimated equations, not just one, as is the case when models are constructed for macroeconomic FORECASTING purposes. See REGRESSION ANALYSIS.
References in periodicals archive ?
In contrast, simulation results from the DRI macroeconometric forecasting model of the U.
The inflation-unemployment relationship in major macroeconometric models is governed in large part by the econometrics of the "price equation" or "wage-price block," which specifies that the inflation rate is a negative function of the level of unemployment.
This is a more general statement of principles underlying Lucas's (1976) critique of macroeconometric models.
Actual macroeconometric models cannot be usefully forced into the mold of temporally ordered causal chains.
Unit root testing is now standard practice in applied macroeconometrics.
If the models are interpreted as structural, on the other hand, the restrictions on error distributions adopted in atheoretical macroeconometrics are not arbitrary renormalizations, but prior identifying restrictions.
The Nobel Committee added that Sargenthas "shown how structural macroeconometrics can be used to analyze permanent changes in economic policy.
Mishkin, "A Rational Expectations Approach to Macroeconometrics," NBER Reporter (Winter 1982/3), pp.
A first step toward new open economy macroeconometrics has been made, for example, by Ghironi (2000c).
In modern macroeconometrics, the textbook procedure is to estimate parameters from the time series that are under study.
Asymmetry in business cycle time series is important for macroeconometrics because linear and Gaussian models are incapable of generating asymmetric fluctuations.
Their results brought the issue of how to handle these nonstationary time series to th e fore in macroeconometrics, and led to econometric methodologies that respected the potential for nonstationarity in important macroeconomic variables.

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