home | alphabetical index | |||||

## Econometrics
Arguably the most important tool of econometrics is regression analysis (for an overview of a linear implementation of this framework, see linear regression). Econometric analysis can often be divided into time-series analysis and cross-sectional analysis. Time-series analysis examines variables over time, such as the effect of interest rates on national expenditure. Cross-sectional analysis studies relationship between different variables at a point in time. For instance, the relationship between income, locality, and personal expenditure. When time-series analysis and cross-sectional analysis are conducted simultaneously on the same sample, it is called panel analysis. If the sample is different each time, it is called pooled cross section data. A simple example of a relationship in econometrics is:
- Personal Expenditure = Propensity to Spend * Income + random error
The above example can also be used to illustrate the many difficulties facing the applied econometrician. For instance, do we really know that the above relationship is correct? Perhaps the true relationship between personal expenditure and income is non-linear (that is, curved). Even if we know the correct theory, it is not certain we can meaure personal expenditure and income correctly. For instance, the value of work by e.g. housewifes is not recorded although it contributes to income. There are also a variety of statistical pitfalls that potentially lead to incorrect conclusions. Econometrics has dealt extensively with such issues. Often it turns out to be difficult to fully implement the resulting methods in practice. In order to classify business and industry, econometricians rely on two main systems: SIC codes and more recently NAICS codes. ## PeopleLawrence Klein was awarded the Nobel Prize for Economic Sciences in 1980 for his computer modelling work in the field of econometrics.Robert Engle and Clive Granger were awarded the Nobel Prize for Economic Sciences in 2003 for work on analysing economic time series. Engle pioneered the method of Autoregressive Conditional Heteroskedasticity (ARCH) and Granger the method of cointegration. | |||||

copyright © 2004 FactsAbout.com |