Econometrics
Encyclopedia
Econometrics has been defined as "the application of mathematics
and statistical methods to economic data" and described as the branch of economics
"that aims to give empirical
content to economic relations." More precisely, it is "the quantitative analysis of actual economic phenomena based on the concurrent development of theory and observation, related by appropriate methods of inference." The first known use of the term "econometrics" (in cognate
form) was by Paweł Ciompa in 1910. Ragnar Frisch
is credited with coining the term in the sense that it is used today.
content to economic theory by formulating economic models in testable form, to estimate those models, and to test them as to acceptance or rejection.
For example, consider one of the basic relationships in economics: the relationship between the price of a commodity and the quantities of that commodity that people wish to purchase at each price (the demand relationship). According to economic theory, an increase in the price would lead to a decrease in the quantity demanded, holding other relevant variables constant so as to isolate the relationship of interest. A mathematical equation can be written that describes the relationship between quantity, price, other demand variables like income, and a random term ε to reflect simplification and imprecision of the theoretical model:
Regression analysis
could be used to estimate the unknown parameters
, 
, and 
in the relationship, using data on price, income, and quantity. The model could then be tested for statistical significance
as to whether an increase in price is associated with a decrease in the quantity, as hypothesized:
.
There are complications even in this simple example, and it is often easy to mistake statistical significance with economic significance. Statistical significance is neither necessary nor sufficient for economic significance. In order to estimate the theoretical demand relationship, the observations in the data set must be price and quantity pairs that are collected along a demand schedule that is stable. If those assumptions are not satisfied, a more sophisticated model or econometric method may be necessary to derive reliable estimates and tests.
Theoretical econometrics examines the statistical properties
of econometric procedures. Such properties include the power
of hypothesis tests and efficiency of estimator
s and of survey-sampling methods. Applied econometrics uses theoretical econometrics and real-world data
for assessing economic theories, developing econometric model
s, analyzing economic history
, and forecasting.
Econometrics may use standard statistical model
s to study economic questions, but most often they are with observational
data, rather than in controlled experiments
. In this, the design of observational studies in econometrics is similar to the design of studies in other observational disciplines, such as astronomy, epidemiology, and political science. Analysis of data from an observational studies is guided by the study protocol, although exploratory
data analysis
may by useful for generating new hypotheses. Economics often analyzes systems of equations and inequalities, such as supply and demand
hypothesized to be in equilibrium. Consequently, the field of econometrics has developed methods for identification
and estimation
of simultaneous-equation models. These methods are analogous to methods used in other areas of science, such as the field of system identification
in systems analysis
and control theory
. Such methods may allow researchers to estimate models and investigate their empirical consequences, without directly manipulating the system.
In recent decades, econometricians have increasingly turned to use of experiments
to evaluate the often-contradictory conclusions of observational studies. Here, controlled and randomized experiments provide statistical inferences that may yield better empirical performance than do purely observational studies.
One of the fundamental statistical methods used by econometricians is regression analysis
. For an overview of a linear implementation of this framework, see linear regression
. Regression methods are important in econometrics because economists typically cannot use controlled experiments. Econometricians often seek illuminating natural experiment
s in the absence of evidence from controlled experiments. Observational data may be subject to omitted-variable bias
and a list of other problems that must be addressed using causal analysis of simultaneous-equation models.
Data set
s to which econometric analyses are applied can be classified as time-series data, cross-sectional data
, panel data
, and multidimensional panel data
. Time-series data sets contain observations over time; for example, inflation over the course of several years. Cross-sectional data sets contain observations at a single point in time; for example, many individuals' incomes in a given year. Panel data sets contain both time-series and cross-sectional observations. Multi-dimensional panel data sets contain observations across time, cross-sectionally, and across some third dimension. For example, the Survey of Professional Forecasters
contains forecasts for many forecasters (cross-sectional observations), at many points in time (time series observations), and at multiple forecast horizons (a third dimension).
Econometric analysis may also be classified on the basis of the number of relationships modeled. Single-equation methods
model a single variable (the dependent variable) as a function of one or more explanatory (or independent) variables. In many econometric contexts,
the commonly-used ordinary least squares
method may not recover the theoretical relation desired or may produce estimates with poor statistical properties, because the assumptions for valid use of the method are violated. One widely-used remedy is the method of instrumental variable
s (IV). For an economic model described by more than one equation, simultaneous-equation methods may be used to remedy similar problems, including two IV variants, Two-Stage Least Squares (2SLS), and Three-Stage Least Squares (3SLS).
Other important unifying or distinguishing methods include the Method of Moments, Generalized Method of Moments (GMM
), time series analysis, and Bayesian methods.
Computational concerns
are important for evaluating econometric methods and for use in decision making. Such concerns include mathematical
well-posedness
: the existence
, uniqueness, and stability
of any solutions to econometric equations. Another concern is the numerical efficiency and accuracy of software. A third concern is also the usability of econometric software.
This example assumes that the natural logarithm
of a person's wage is a linear function of (among other things) the number of years of education that person has acquired. The parameter
measures the increase in the natural log of the wage attributable to one more year of education. The term 
is a random variable representing all other factors that may have direct influence on wage. The econometric goal is to estimate the parameters, 
under specific assumptions about the random variable 
. For example, if 
is uncorrelated with years of education, then the equation can be estimated with ordinary least squares
.
If the researcher could randomly assign people to different levels of education, the data set thus generated would allow estimation of the effect of changes in years of education on wages. In reality, those experiments cannot be conducted. Instead, the econometrician observes the years of education of and the wages paid to people who differ along many dimensions. Given this kind of data, the estimated coefficient on Years of Education in the equation above reflects both the effect of education on wages and the effect of other variables on wages, if those other variables were correlated with education. For example, people born in certain places may have higher wages and higher levels of education. Unless the econometrician controls for place of birth in the above equation, the effect of birthplace on wages may be falsely attributed to the effect of education on wages.
The most obvious way to control for birthplace is to include a measure of the effect of birthplace in the equation above. Exclusion of birthplace, together with the assumption that
is uncorrelated with education produces a misspecified model. A second technique for dealing with omitted variables is instrumental variables estimation. Still a third technique is to include in the equation additional set of measured covariates which are not instrumental variables, yet render 
identifiable. An overview of econometric methods used to study this problem can be found in Card (1999).
recipients in the field of econometrics:
The following are other influential econometricians that have won the John Bates Clark Medal
in the field of econometrics:
, the Journal of Econometrics
, the Review of Economics and Statistics
, Econometric Theory
, the Journal of Applied Econometrics
, Econometric Reviews
, the Econometrics Journal
, Applied Econometrics and International Development
, the Journal of Business & Economic Statistics
, and the Journal of Economic and Social Measurement.
Mathematics
Mathematics is the study of quantity, space, structure, and change. Mathematicians seek out patterns and formulate new conjectures. Mathematicians resolve the truth or falsity of conjectures by mathematical proofs, which are arguments sufficient to convince other mathematicians of their validity...
and statistical methods to economic data" and described as the branch of economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
"that aims to give empirical
Empirical
The word empirical denotes information gained by means of observation or experimentation. Empirical data are data produced by an experiment or observation....
content to economic relations." More precisely, it is "the quantitative analysis of actual economic phenomena based on the concurrent development of theory and observation, related by appropriate methods of inference." The first known use of the term "econometrics" (in cognate
Cognate
In linguistics, cognates are words that have a common etymological origin. This learned term derives from the Latin cognatus . Cognates within the same language are called doublets. Strictly speaking, loanwords from another language are usually not meant by the term, e.g...
form) was by Paweł Ciompa in 1910. Ragnar Frisch
Ragnar Anton Kittil Frisch
Ragnar Anton Kittil Frisch was a Norwegian economist and the co-winner with Jan Tinbergen of the first Nobel Memorial Prize in Economic Sciences in 1969...
is credited with coining the term in the sense that it is used today.
Purpose
Two main purposes of econometrics are to give empiricalEmpiricism
Empiricism is a theory of knowledge that asserts that knowledge comes only or primarily via sensory experience. One of several views of epistemology, the study of human knowledge, along with rationalism, idealism and historicism, empiricism emphasizes the role of experience and evidence,...
content to economic theory by formulating economic models in testable form, to estimate those models, and to test them as to acceptance or rejection.
For example, consider one of the basic relationships in economics: the relationship between the price of a commodity and the quantities of that commodity that people wish to purchase at each price (the demand relationship). According to economic theory, an increase in the price would lead to a decrease in the quantity demanded, holding other relevant variables constant so as to isolate the relationship of interest. A mathematical equation can be written that describes the relationship between quantity, price, other demand variables like income, and a random term ε to reflect simplification and imprecision of the theoretical model:
Regression analysis
Regression analysis
In statistics, regression analysis includes many techniques for modeling and analyzing several variables, when the focus is on the relationship between a dependent variable and one or more independent variables...
could be used to estimate the unknown parameters
, , and in the relationship, using data on price, income, and quantity. The model could then be tested for statistical significanceStatistical significance
In statistics, a result is called statistically significant if it is unlikely to have occurred by chance. The phrase test of significance was coined by Ronald Fisher....
as to whether an increase in price is associated with a decrease in the quantity, as hypothesized:
.There are complications even in this simple example, and it is often easy to mistake statistical significance with economic significance. Statistical significance is neither necessary nor sufficient for economic significance. In order to estimate the theoretical demand relationship, the observations in the data set must be price and quantity pairs that are collected along a demand schedule that is stable. If those assumptions are not satisfied, a more sophisticated model or econometric method may be necessary to derive reliable estimates and tests.
Methods
-
- See also Methodology of econometricsMethodology of econometricsThe methodology of econometrics is the study of the range of differing approaches to undertaking econometric analysis.Commonly distinguished differing approaches that have been identified and studied include:* the Cowles Commission approach...
- See also Methodology of econometrics
Theoretical econometrics examines the statistical properties
Statistical theory
The theory of statistics provides a basis for the whole range of techniques, in both study design and data analysis, that are used within applications of statistics. The theory covers approaches to statistical-decision problems and to statistical inference, and the actions and deductions that...
of econometric procedures. Such properties include the power
Statistical power
The power of a statistical test is the probability that the test will reject the null hypothesis when the null hypothesis is actually false . The power is in general a function of the possible distributions, often determined by a parameter, under the alternative hypothesis...
of hypothesis tests and efficiency of estimator
Estimator
In statistics, an estimator is a rule for calculating an estimate of a given quantity based on observed data: thus the rule and its result are distinguished....
s and of survey-sampling methods. Applied econometrics uses theoretical econometrics and real-world data
Economic data
Economic data or economic statistics may refer to data describing an actual economy, past or present. These are typically found in time-series form, that is, covering more than one time period or in cross-sectional data in one time period Economic data or economic statistics may refer to data...
for assessing economic theories, developing econometric model
Econometric model
Econometric models are statistical models used in econometrics. An econometric model specifies the statistical relationship that is believed to hold between the various economic quantities pertaining to a particular economic phenomenon under study...
s, analyzing economic history
Economic history
Economic history is the study of economies or economic phenomena in the past. Analysis in economic history is undertaken using a combination of historical methods, statistical methods and by applying economic theory to historical situations and institutions...
, and forecasting.
Econometrics may use standard statistical model
Statistical model
A statistical model is a formalization of relationships between variables in the form of mathematical equations. A statistical model describes how one or more random variables are related to one or more random variables. The model is statistical as the variables are not deterministically but...
s to study economic questions, but most often they are with observational
Observational study
In epidemiology and statistics, an observational study draws inferences about the possible effect of a treatment on subjects, where the assignment of subjects into a treated group versus a control group is outside the control of the investigator...
data, rather than in controlled experiments
Experiment
An experiment is a methodical procedure carried out with the goal of verifying, falsifying, or establishing the validity of a hypothesis. Experiments vary greatly in their goal and scale, but always rely on repeatable procedure and logical analysis of the results...
. In this, the design of observational studies in econometrics is similar to the design of studies in other observational disciplines, such as astronomy, epidemiology, and political science. Analysis of data from an observational studies is guided by the study protocol, although exploratory
Exploratory data analysis
In statistics, exploratory data analysis is an approach to analysing data sets to summarize their main characteristics in easy-to-understand form, often with visual graphs, without using a statistical model or having formulated a hypothesis...
data analysis
Data analysis
Analysis of data is a process of inspecting, cleaning, transforming, and modeling data with the goal of highlighting useful information, suggesting conclusions, and supporting decision making...
may by useful for generating new hypotheses. Economics often analyzes systems of equations and inequalities, such as supply and demand
Supply and demand
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...
hypothesized to be in equilibrium. Consequently, the field of econometrics has developed methods for identification
Parameter identification problem
The parameter identification problem is a problem which can occur in the estimation of multiple-equation econometric models where the equations have variables in common....
and estimation
Estimation theory
Estimation theory is a branch of statistics and signal processing that deals with estimating the values of parameters based on measured/empirical data that has a random component. The parameters describe an underlying physical setting in such a way that their value affects the distribution of the...
of simultaneous-equation models. These methods are analogous to methods used in other areas of science, such as the field of system identification
System identification
In control engineering, the field of system identification uses statistical methods to build mathematical models of dynamical systems from measured data...
in systems analysis
Systems analysis
Systems analysis is the study of sets of interacting entities, including computer systems analysis. This field is closely related to requirements analysis or operations research...
and control theory
Control theory
Control theory is an interdisciplinary branch of engineering and mathematics that deals with the behavior of dynamical systems. The desired output of a system is called the reference...
. Such methods may allow researchers to estimate models and investigate their empirical consequences, without directly manipulating the system.
In recent decades, econometricians have increasingly turned to use of experiments
Experimental economics
Experimental economics is the application of experimental methods to study economic questions. Data collected in experiments are used to estimate effect size, test the validity of economic theories, and illuminate market mechanisms. Economic experiments usually use cash to motivate subjects, in...
to evaluate the often-contradictory conclusions of observational studies. Here, controlled and randomized experiments provide statistical inferences that may yield better empirical performance than do purely observational studies.
One of the fundamental statistical methods used by econometricians is regression analysis
Regression analysis
In statistics, regression analysis includes many techniques for modeling and analyzing several variables, when the focus is on the relationship between a dependent variable and one or more independent variables...
. For an overview of a linear implementation of this framework, see linear regression
Linear regression
In statistics, linear regression is an approach to modeling the relationship between a scalar variable y and one or more explanatory variables denoted X. The case of one explanatory variable is called simple regression...
. Regression methods are important in econometrics because economists typically cannot use controlled experiments. Econometricians often seek illuminating natural experiment
Natural experiment
A natural experiment is an observational study in which the assignment of treatments to subjects has been haphazard: That is, the assignment of treatments has been made "by nature", but not by experimenters. Thus, a natural experiment is not a controlled experiment...
s in the absence of evidence from controlled experiments. Observational data may be subject to omitted-variable bias
Omitted-variable bias
In statistics, omitted-variable bias occurs when a model is created which incorrectly leaves out one or more important causal factors. The 'bias' is created when the model compensates for the missing factor by over- or under-estimating one of the other factors.More specifically, OVB is the bias...
and a list of other problems that must be addressed using causal analysis of simultaneous-equation models.
Data set
Data set
A data set is a collection of data, usually presented in tabular form. Each column represents a particular variable. Each row corresponds to a given member of the data set in question. Its values for each of the variables, such as height and weight of an object or values of random numbers. Each...
s to which econometric analyses are applied can be classified as time-series data, cross-sectional data
Cross-sectional data
Cross-sectional data or cross section in statistics and econometrics is a type of one-dimensional data set. Cross-sectional data refers to data collected by observing many subjects at the same point of time, or without regard to differences in time...
, panel data
Panel data
In statistics and econometrics, the term panel data refers to multi-dimensional data. Panel data contains observations on multiple phenomena observed over multiple time periods for the same firms or individuals....
, and multidimensional panel data
Multidimensional panel data
In econometrics, panel data is data observed over two dimensions . A panel data set is termed "multidimensional" when the phenomenon is observed over three or more dimensions...
. Time-series data sets contain observations over time; for example, inflation over the course of several years. Cross-sectional data sets contain observations at a single point in time; for example, many individuals' incomes in a given year. Panel data sets contain both time-series and cross-sectional observations. Multi-dimensional panel data sets contain observations across time, cross-sectionally, and across some third dimension. For example, the Survey of Professional Forecasters
Survey of Professional Forecasters
The Survey of Professional Forecasters, also called, The Anxious Index, is a highly predictive report on the prospects for the Economy of the United States issued quarterly by the Federal Reserve Bank of Philadelphia. "The Survey of Professional Forecasters is the oldest quarterly survey of...
contains forecasts for many forecasters (cross-sectional observations), at many points in time (time series observations), and at multiple forecast horizons (a third dimension).
Econometric analysis may also be classified on the basis of the number of relationships modeled. Single-equation methods
Single equation methods (econometrics)
A variety of methods are used in econometrics to estimate models consisting of a single equation. The oldest and still the most commonly used is the ordinary least squares method used to estimate linear regressions....
model a single variable (the dependent variable) as a function of one or more explanatory (or independent) variables. In many econometric contexts,
the commonly-used ordinary least squares
Ordinary least squares
In statistics, ordinary least squares or linear least squares is a method for estimating the unknown parameters in a linear regression model. This method minimizes the sum of squared vertical distances between the observed responses in the dataset and the responses predicted by the linear...
method may not recover the theoretical relation desired or may produce estimates with poor statistical properties, because the assumptions for valid use of the method are violated. One widely-used remedy is the method of instrumental variable
Instrumental variable
In statistics, econometrics, epidemiology and related disciplines, the method of instrumental variables is used to estimate causal relationships when controlled experiments are not feasible....
s (IV). For an economic model described by more than one equation, simultaneous-equation methods may be used to remedy similar problems, including two IV variants, Two-Stage Least Squares (2SLS), and Three-Stage Least Squares (3SLS).
Other important unifying or distinguishing methods include the Method of Moments, Generalized Method of Moments (GMM
Generalized method of moments
In econometrics, generalized method of moments is a generic method for estimating parameters in statistical models. Usually it is applied in the context of semiparametric models, where the parameter of interest is finite-dimensional, whereas the full shape of the distribution function of the data...
), time series analysis, and Bayesian methods.
Computational concerns
Computational economics
Computational economics is a research discipline at the interface between computer science and economic and management science. Areas encompassed include agent-based computational modeling, computational modeling of dynamic macroeconomic systems and transaction costs, other applications in...
are important for evaluating econometric methods and for use in decision making. Such concerns include mathematical
Mathematics
Mathematics is the study of quantity, space, structure, and change. Mathematicians seek out patterns and formulate new conjectures. Mathematicians resolve the truth or falsity of conjectures by mathematical proofs, which are arguments sufficient to convince other mathematicians of their validity...
well-posedness
Well-posed problem
The mathematical term well-posed problem stems from a definition given by Jacques Hadamard. He believed that mathematical models of physical phenomena should have the properties that# A solution exists# The solution is unique...
: the existence
Existence
In common usage, existence is the world we are aware of through our senses, and that persists independently without them. In academic philosophy the word has a more specialized meaning, being contrasted with essence, which specifies different forms of existence as well as different identity...
, uniqueness, and stability
Stability theory
In mathematics, stability theory addresses the stability of solutions of differential equations and of trajectories of dynamical systems under small perturbations of initial conditions...
of any solutions to econometric equations. Another concern is the numerical efficiency and accuracy of software. A third concern is also the usability of econometric software.
Example
A simple example of a relationship in econometrics from the field of labor economics is:This example assumes that the natural logarithm
Natural logarithm
The natural logarithm is the logarithm to the base e, where e is an irrational and transcendental constant approximately equal to 2.718281828...
of a person's wage is a linear function of (among other things) the number of years of education that person has acquired. The parameter
measures the increase in the natural log of the wage attributable to one more year of education. The term is a random variable representing all other factors that may have direct influence on wage. The econometric goal is to estimate the parameters, under specific assumptions about the random variable . For example, if is uncorrelated with years of education, then the equation can be estimated with ordinary least squaresLinear regression
In statistics, linear regression is an approach to modeling the relationship between a scalar variable y and one or more explanatory variables denoted X. The case of one explanatory variable is called simple regression...
.
If the researcher could randomly assign people to different levels of education, the data set thus generated would allow estimation of the effect of changes in years of education on wages. In reality, those experiments cannot be conducted. Instead, the econometrician observes the years of education of and the wages paid to people who differ along many dimensions. Given this kind of data, the estimated coefficient on Years of Education in the equation above reflects both the effect of education on wages and the effect of other variables on wages, if those other variables were correlated with education. For example, people born in certain places may have higher wages and higher levels of education. Unless the econometrician controls for place of birth in the above equation, the effect of birthplace on wages may be falsely attributed to the effect of education on wages.
The most obvious way to control for birthplace is to include a measure of the effect of birthplace in the equation above. Exclusion of birthplace, together with the assumption that
is uncorrelated with education produces a misspecified model. A second technique for dealing with omitted variables is instrumental variables estimation. Still a third technique is to include in the equation additional set of measured covariates which are not instrumental variables, yet render identifiable. An overview of econometric methods used to study this problem can be found in Card (1999).Noted econometricians
The following are the Nobel Memorial Prize in Economic SciencesNobel Memorial Prize in Economic Sciences
The Nobel Memorial Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics, but officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel , is an award for outstanding contributions to the field of economics, generally regarded as one of the...
recipients in the field of econometrics:
- Jan TinbergenJan TinbergenJan Tinbergen , was a Dutch economist. He was awarded the first Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel in 1969, which he shared with Ragnar Frisch for having developed and applied dynamic models for the analysis of economic processes...
, former Professor at the Erasmus University Rotterdam, and Ragnar Frisch were awarded the first prize in 1969 for having developed and applied dynamic models for the analysis of economic processes. - Lawrence KleinLawrence KleinLawrence Robert Klein is an American economist. For his work in creating computer models to forecast economic trends in the field of econometrics at the Wharton School of the University of Pennsylvania, he was awarded the Nobel Memorial Prize in Economic Sciences in 1980...
, Professor of Economics at the University of PennsylvaniaUniversity of PennsylvaniaThe University of Pennsylvania is a private, Ivy League university located in Philadelphia, Pennsylvania, United States. Penn is the fourth-oldest institution of higher education in the United States,Penn is the fourth-oldest using the founding dates claimed by each institution...
, was awarded the Nobel Memorial Prize in Economic SciencesNobel Memorial Prize in Economic SciencesThe Nobel Memorial Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics, but officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel , is an award for outstanding contributions to the field of economics, generally regarded as one of the...
in 1980 for his computer modeling work in the field. - Trygve HaavelmoTrygve HaavelmoTrygve Magnus Haavelmo , born in Skedsmo, Norway, was an influential economist with main research interests centered on the fields of econometrics and economics theory. During World War II he worked with Nortraship in the Statistical Department in New York City. He received his Ph.D...
was awarded the Nobel Memorial Prize in Economic SciencesNobel Memorial Prize in Economic SciencesThe Nobel Memorial Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics, but officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel , is an award for outstanding contributions to the field of economics, generally regarded as one of the...
in 1989. His main contribution to econometrics was his 1944 article (published in EconometricaEconometricaEconometrica is a peer-reviewed academic journal of economics, publishing articles not only in econometrics but in many areas of economics. It is published by the Econometric Society and distributed by Wiley-Blackwell. Econometrica is one of the most highly ranked economics journals in the world...
) "The Probability Approach to Econometrics." - Daniel McFaddenDaniel McFaddenDaniel Little McFadden is an econometrician who shared the 2000 Nobel Memorial Prize in Economic Sciences with James Heckman ; McFadden's share of the prize was "for his development of theory and methods for analyzing discrete choice". He was the E. Morris Cox Professor of Economics at the...
and James HeckmanJames HeckmanJames Joseph Heckman is an American economist and Nobel laureate. He is the Henry Schultz Distinguished Service Professor of Economics at the University of Chicago, Professor of Science and Society at University College Dublin and a Senior Research Fellow at the American Bar Foundation.Heckman...
were awarded in 2000 for their work in microeconometrics. McFadden founded the econometrics lab at the University of California, BerkeleyUniversity of California, BerkeleyThe University of California, Berkeley , is a teaching and research university established in 1868 and located in Berkeley, California, USA...
. - Robert Engle at the University of California, San DiegoUniversity of California, San DiegoThe University of California, San Diego, commonly known as UCSD or UC San Diego, is a public research university located in the La Jolla neighborhood of San Diego, California, United States...
, and Clive GrangerClive GrangerSir Clive William John Granger was a British economist, who taught in Britain at the University of Nottingham and in the U.S.A. at the University of California, San Diego. In 2003, Granger was awarded the Nobel Memorial Prize in Economic Sciences, in recognition that he and his co-winner, Robert F...
, at the University of NottinghamUniversity of NottinghamThe University of Nottingham is a public research university based in Nottingham, United Kingdom, with further campuses in Ningbo, China and Kuala Lumpur, Malaysia...
, were awarded in 2003 for work on analyzing economic time series. Engle pioneered the method of autoregressive conditional heteroskedasticityAutoregressive conditional heteroskedasticityIn econometrics, AutoRegressive Conditional Heteroskedasticity models are used to characterize and model observed time series. They are used whenever there is reason to believe that, at any point in a series, the terms will have a characteristic size, or variance...
(ARCH) and Granger the method of cointegrationCointegrationCointegration is a statistical property of time series variables. Two or more time series are cointegrated if they share a common stochastic drift.-Introduction:...
. - Christopher Sims and Thomas Sargent were awarded the 2011 nobel prize in economics for the development of vector autoregressionVector autoregressionVector autoregression is a statistical model used to capture the linear interdependencies among multiple time series. VAR models generalize the univariate autoregression models. All the variables in a VAR are treated symmetrically; each variable has an equation explaining its evolution based on...
models and methods for the analysis of structural breaks.
The following are other influential econometricians that have won the John Bates Clark Medal
John Bates Clark Medal
The John Bates Clark Medal is awarded by the American Economic Association to "that American economist under the age of forty who is adjudged to have made a significant contribution to economic thought and knowledge"...
in the field of econometrics:
- Jerry Hausman, professor at the MIT, who among other distinctions developed the Hausman specification test in econometrics.
Journals
The main journals which publish work in econometrics are EconometricaEconometrica
Econometrica is a peer-reviewed academic journal of economics, publishing articles not only in econometrics but in many areas of economics. It is published by the Econometric Society and distributed by Wiley-Blackwell. Econometrica is one of the most highly ranked economics journals in the world...
, the Journal of Econometrics
Journal of Econometrics
The Journal of Econometrics is a leading scholarly journal in econometrics. It was first published in 1973. Its current editors are A.R. Gallant, J.F. Geweke, C. Hsiao, and P.M...
, the Review of Economics and Statistics
Review of Economics and Statistics
The Review of Economics and Statistics is a peer-reviewed scientific journal specializing in applied quantitative economics, now called econometrics. It was founded in 1917 and first published as The Review of Economic Statistics in 1919...
, Econometric Theory
Econometric Theory
Econometric Theory is an economic journal specialising in econometrics. Its editor is Peter Phillips. According to research in 2003 it is the seventh most important economic journal.-Source:...
, the Journal of Applied Econometrics
Journal of Applied Econometrics
The Journal of Applied Econometrics is a peer-reviewed academic journal covering econometrics. It focuses on applications rather than theoretical issues. It was established in 1986 and is published 7 times per year. Its editor-in-chief is M. Hashem Pesaran of Cambridge University. Since 1994 it has...
, Econometric Reviews
Econometric Reviews
Econometric Reviews is a scholarly econometrics journal. It is published six times per year.Its editor is Esfandiar Maasoumi...
, the Econometrics Journal
Econometrics Journal
The Econometrics Journal is a peer-reviewed academic journal that covers all areas of econometrics research, ranging from computational and theoretical to methodological topics. It was established in 1998 by the Royal Economic Society....
, Applied Econometrics and International Development
Applied Econometrics and International Development
Applied Econometrics and International Development is an international journal of economics published by the Euro-American Association of Economic Development Studies. The journal debuted in 2001 and by 2006 was amongst the Top 50 most downloaded journals from Ideas.Repec. Nobel Prize winner...
, the Journal of Business & Economic Statistics
Journal of Business & Economic Statistics
The Journal of Business and Economic Statistics is an academic journal, published quarterly by the American Statistical Association. The journal publishes articles dealing with a broad range of applied problems in business and economic statistics...
, and the Journal of Economic and Social Measurement.
Software
- EViewsEViewsEViews is a statistical package for Windows, used mainly for time-series oriented econometric analysis. It is developed by Quantitative Micro Software , now a part of IHS. Version 1.0 was released in March 1994, and replaced MicroTSP...
- GretlGretlgretl is an open-source statistical package, mainly for econometrics. The name is an acronym for Gnu Regression, Econometrics and Time-series Library. It has a graphical user interface and can be used together with X-12-ARIMA, TRAMO/SEATS, R, Octave, and Ox. It is written in C, uses GTK as widget...
- MATLABMATLABMATLAB is a numerical computing environment and fourth-generation programming language. Developed by MathWorks, MATLAB allows matrix manipulations, plotting of functions and data, implementation of algorithms, creation of user interfaces, and interfacing with programs written in other languages,...
and Econometrics Toolbox - OxMetricsOxMetricsOxMetrics is an econometric software including the Ox programming language for econometrics and statistics, developed by Jurgen Doornik and David Hendry...
- SHAZAM
- StataStataStata is a general-purpose statistical software package created in 1985 by StataCorp. It is used by many businesses and academic institutions around the world...
- TSPTSP (econometrics software)TSP is a programming language for the estimation and simulation of econometric models. TSP stands for "Time Series Processor", although it is also commonly used with cross section and panel data. The company behind the program is TSP International which was founded in 1978 by Bronwyn H...
- RR (programming language)R is a programming language and software environment for statistical computing and graphics. The R language is widely used among statisticians for developing statistical software, and R is widely used for statistical software development and data analysis....
- PSPPPSPPPSPP is a free software application for analysis of sampled data. It has a graphical user interface and conventional command line interface. It is written in C, uses GNU Scientific Library for its mathematical routines, and plotutils for generating graphs....
- RATSRATS (statistical package)RATS, an abbreviation of Regression Analysis of Time Series, is a statistical package for time series analysis and econometrics. RATS is developed and sold by Estima, Inc. , located in Evanston, IL.-History:...
- SAS
- SPSSSPSSSPSS is a computer program used for survey authoring and deployment , data mining , text analytics, statistical analysis, and collaboration and deployment ....
- Comparison of statistical packagesComparison of statistical packagesThe following tables compare general and technical information for a number of statistical analysis packages.-General information:Basic information about each product...
See also
- Cowles FoundationCowles FoundationThe Cowles Commission for Research in Economics is an economic research institute, founded in Colorado Springs in 1932 by Alfred Cowles, a businessman and economist. In 1939, the Cowles Commission moved to the University of Chicago under the directorship of Theodore O. Yntema. Jacob Marschak took...
- Correlation does not imply causationCorrelation does not imply causation"Correlation does not imply causation" is a phrase used in science and statistics to emphasize that correlation between two variables does not automatically imply that one causes the other "Correlation does not imply causation" (related to "ignoring a common cause" and questionable cause) is a...
- Choice ModellingChoice ModellingChoice modelling attempts to model the decision process of an individual or segment in a particular context. Choice modelling may also be used to estimate non-market environmental benefits and costs....
- Modeling and analysis of financial markets
- Macroeconomic model
- Important publications in econometrics
- Single equation methods (econometrics)Single equation methods (econometrics)A variety of methods are used in econometrics to estimate models consisting of a single equation. The oldest and still the most commonly used is the ordinary least squares method used to estimate linear regressions....
- Granger causalityGranger causalityThe Granger causality test is a statistical hypothesis test for determining whether one time series is useful in forecasting another. Ordinarily, regressions reflect "mere" correlations, but Clive Granger, who won a Nobel Prize in Economics, argued that there is an interpretation of a set of tests...
- Augmented Dickey–Fuller test
- Unit rootUnit rootIn time series models in econometrics , a unit root is a feature of processes that evolve through time that can cause problems in statistical inference if it is not adequately dealt with....
- Predetermined variablesPredetermined variablesPredetermined variables are variables that were determined prior to the current period. In econometric models this implies that the current period error term is uncorrelated with current and lagged values of the predetermined variable but may be correlated with future values...
- Methodology of econometricsMethodology of econometricsThe methodology of econometrics is the study of the range of differing approaches to undertaking econometric analysis.Commonly distinguished differing approaches that have been identified and studied include:* the Cowles Commission approach...
- Spatial econometricsSpatial econometricsSpatial Econometrics is the field where spatial analysis and econometrics intersect. In general, econometrics differs from other branches of statistics in focusing on theoretical models, whose parameters are estimated using regression analysis...
- Master of EconomicsMaster of EconomicsA Master's Degree in Economics is a postgraduate academic program, offering training in economic theory, econometrics and / or applied economics. The degree may be offered as a terminal degree or as additional preparation for doctoral study, and is sometimes offered as a professional degree...
Further reading
- Econometric Theory book on Wikibooks
- Giovanini, Enrico Understanding Economic Statistics, OECD Publishing, 2008, ISBN 978-92-64-03312-2
External links
- Econometric Links
- Econometric Society
- Directory of Econometricians
- The Econometrics Journal
- Teaching Econometrics (Index by the Economics Network (UK))
- Applied Econometric Association
- "The Art and Science of Cause and Effect": a slide show and tutorial lecture by Judea Pearl
- Econometric Institute Erasmus University: one of the leading Econometric Institutes
- Tinbergen InstituteTinbergen InstituteThe Tinbergen Institute is a joint institute for economic research of the University of Amsterdam, the Vrije Universiteit and the Erasmus University...
: one of the leading Economic/Econometric institutes - The Society for Financial Econometrics
- Econometrics Books