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An econometric model then is a set of joint probability distributions to which the true joint probability distribution of the variables under study is supposed to belong. In the case in which the elements of this set can be indexed by a finite number of real-valued parameters , the model is called a parametric model ; otherwise it is a ...
A basic tool for econometrics is the multiple linear regression model. [8] Econometric theory uses statistical theory and mathematical statistics to evaluate and develop econometric methods. [9] [10] Econometricians try to find estimators that have desirable statistical properties including unbiasedness, efficiency, and consistency.
An economic model is a theoretical construct representing economic processes by a set of variables and a set of logical and/or quantitative relationships between them. The economic model is a simplified, often mathematical, framework designed to illustrate complex processes. Frequently, economic models posit structural parameters. [1]
Econometrics may use standard statistical models to study economic questions, but most often they are with observational data, rather than in controlled experiments. [10] In this, the design of observational studies in econometrics is similar to the design of studies in other observational disciplines, such as astronomy, epidemiology, sociology and political science.
The model was cited in 1980 when Klein, like Tinbergen before him, won the Nobel Prize in Economics. Large-scale empirical models of this type, including the Wharton model, are still in use as of 2011 [update] , especially for forecasting purposes.
Financial econometrics is the application of statistical methods to financial market data. [1] Financial econometrics is a branch of financial economics, in the field of economics. Areas of study include capital markets, [2] financial institutions, corporate finance and corporate governance. Topics often revolve around asset valuation of ...
For example, a regression is often called a reduced-form equation even when no standard economic model would generate it as the reduced form relationship between variables. These conflicting distinctions between structural and reduced form estimation arose from the increasing complexity of economic theory since the formalization of simultaneous ...
Econometric models are used by economists to estimate relationships between large numbers of variables, most importantly to model national economies or the world economy. Econometric models is included in the JEL classification codes as JEL: C5