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From the definition of econometrics, econometrics involves the use of mathematical and statistical economics. Economic theory makes is mostly qualitative for example, an economics theory states that, with all things being equal, when the price of a commodity is increased, then the demand for such commodity is decreased. Moreover, this theory does not state any strength of the relationship between the two. It means it does not categorically state the amount of quantity demanded that will increase or decrease as a result of the change in the price of the commodity. But such numerical estimate can be provided with the help of econometrics. Econometrics gives in-depth content and meaning to many economic theories. Moreover, the major concern of mathematical economics is the ability to be able to express any economic theory in a mathematical equation without measuring and verifying. Economic statistics are extremely involved with the processing of data in the form of diagrams and this data makes up the raw data for econometric work. So, the economic statistician does not need to go further because they don’t process data for the purpose of testing economic theories. also, mathematics statistics provide most of the tools used in trades, econometrics rely on data that cannot be directly controlled. Thus, it makes data collected on income, saving, investment, and prices naturally un-experimental.
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To inform public policy debates, make business decisions, and forecast future events, economists use some tools. They apply these econometric tools in different areas such as it measure the association between insurance coverage and individual health outcomes and deriving the effect of dividend statements on stock market prices and investor behavior. It is also helpful to predict the revenues increases in response to a marketing campaign and calculate the impact of an organization’s tax credits on Research and Deployment expenditure. It can be used to identify the factors that affect a company’s entry and exit into a market and determine the effect of minimum-wage laws on employment levels.
Models: There are some common econometric models such as Linear regression, Generalized linear models, Probit, Logit, Tobit, ARIMA, Vector Autoregression, Cointegration, Hazard, and more.
Methodology: In addition, the methodology of econometrics is not all about the study of particular econometric techniques, mainly it is a meta-study of how econometrics contributes to economic science. apart from this, it is part of the philosophy of science. Moreover, the principal methodological issue for econometrics is the application of probability theory to economics and it is the mapping between economic theory and probability models.
Scope: Quantitative economics is one of the most popular and highly specialized fields of study and It is taught at the post-graduation level. Thus, these courses related to econometrics are getting more popular in the world. Again, it is not that easy as it is done by some of the best brains of society. The study of econometrics become more popular as it is part of economics. Moreover, economics is used to approach problems and provide efficient solutions analytically. Again, It is also used to deal with the study of complex mathematical and statistical models. Therefore, These models can help in the detailed study of concepts of economics. The growth of this industry is always dependent on significant factors such as resource utilization, maximization of revenue, and similar factors. In addition, the demand for experts in this field is getting huge across all sectors.
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