Economists like to make theories. . They theories about why inflation happens, for example, or what causes unemployment. But theories are not useful if you cannot testthem. This is true for all sciences, and the same for economics.
To test a theory, you first need to gather what scientists call empirical evidence. That´s evidence that can be measured, like moneyspent or babies born. When you have collected evidence, you´re ready to do the math sans statistics to test your theory. Economists call their maths econometrics.
Let´s take an example. Imagine thatyou want to find out why some people save more money than others. You may think that this depends on two things: how much they earn (their income) and how happy they generally are about saving money.We can express your theory as an econometric formula:
Amount some saves= their income X their happiness to save
Of course, we can´t measure happiness to save exactly, but with econometricmathematics we can give it a value. Then we can see how that value differs between groups of people or cultures. Econometrics is about finding relationships between variables- in other words relationshipsbetween values that change. Economists try to find out if variable A changes every time value B changes. They want to find out if variable A is dependent on variable B. This is called analysis, and thereare two main kinds of econometric analysis: time series analysis and across-sectional analysis.
Time series- analysis shows how variable change over a period of time. How salaries increased over thelast century, for example. Cross- sectional analysis compares variables at one point in the time. The salaries of men compared to women right now, for example. Of course, economists like to make thingsmore complicated than that. Sometimes they combine cross-sectional with time-series analysis, and this is called panel data analysis.
As we said earlier, econometric is good for testing economic...
Leer documento completo
Regístrate para leer el documento completo.