# 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.

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