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Econometrics literally means “to measure economy”. Thus, econometrics is a statistical and mathematical modeling approach to the study of economics. By formulating specific equations, econometrics explicates various economic phenomena, such as the relationship between changes in the price and demand. By employing econometrics, economists are able to estimate production functions, cost functions, and other variables such industry supply and demand. In addition to determining product and income distribution in the economy, econometrics is also used to interpret other macroeconomic trends, such as business cycles and potential for growth. Econometrics enabled models help both private corporations and the government. In the government, sector econometrics is often applied to help set the fiscal and monetary policy. Economists specializing in econometrics are called econometricians. |
