CHAPTER 1 INTRODUCTION 1
Chapter 1 Introduction
1.1 What is econometrics?
? Application of statistical and mathematical methods to the analysis of economic
data.
? Purposes
1. Testingeconomictheories
2. Policyanalysis(simultaneousequationsmodel,vectorautoregressivemodel)
3. Forecasting
? History
SeeMaryMorgan’s(1990)“TheHistoryofEconometricIdeas”(CambridgeUniv.
Press)
1.2 Econometric model
? Consistsofseveralequationsderivedfromeconomictheoryandreasoning
Example 1 Consumption function
ct = α +βYt +γrt +εt
ct : aggregate consumption observed at period t
Yt : total income observed at period t
rt : interest rate observed at period t
ut : error term
1.3 Tools for econometrics
? Economics,mathematics,probability,statistics,computation.
1.4 Research outlet
? Journals: Econometrica, Econometric Theory, Econometric Journal, Journal of
Econometrics,JournalofAppliedEconometrics, · · ·
? Handbooks: HandbookofEconometrics,HandbookofAppliedEconometrics,Pal-
graveHandbooksofEconometrics,etc. (containreviewarticles).
