Lecture 2
Topic: Meaning of Econometrics
● Econometrics is the science and art of applying mathematical and statistical tools
to analyse economic data with an objective to measure empirical validity of
economic theory.
● The branch of economics concerned with the use of mathematical methods
(especially statistics) in describing economic systems.
● Econometrics deals with the measurement of economic relationships. It is an
integration of economics, mathematical economics and statistics with an
objective to provide numerical values to the parameters of economic
relationships.
● Econometrics is the application of statistical and mathematical theories in
economics for the purpose of testing hypotheses and forecasting future trends.
● It is an integration of economic theories, mathematical economics and statistics
with an objective to provide numerical values to the parameters of economic
relationships. The relationships of economic theories are usually expressed in
mathematical forms and combined with empirical economics.
● The econometrics methods are used to obtain the values of parameters which
are essentially the coefficients of the mathematical form of the economic
relationships. The statistical methods which help in explaining the economic
phenomenon are adapted as econometric methods.
● The econometric relationships depict the random behaviour of economic
relationships which are generally not considered in economics and mathematical
formulations.
● It may be pointed out that the econometric methods can be used in other areas
like engineering sciences, biological sciences, medical sciences, geosciences,
agricultural sciences etc.
● In simple words, whenever there is a need of finding the stochastic relationship
in mathematical format, the econometric methods and tools help. The
econometric tools are helpful in explaining the relationships among variables.
Reflexion Questions:
1. What is the difference between Statistics and Econometrics?
2. What is the difference between Mathematics and Econometrics?
3. How is Econometrics different from Mathematical Economics?
4. Explain Econometrics using venn diagram?
Knowledge Quiz:
1. Econometrics deals with _____________ variables.
2. The econometrics methods are used to obtain the values of ____________.
Assimilation Quiz:
1. Write two variables where you want to apply econometrics methods.
2. What are the advantages of knowing econometrics as a subject? Any two.
Other task:
- Create a twitter account (if you don’t have)
- Think and share a hashtag or our class (those who are interested to share go to
this link:
https://docs.google.com/spreadsheets/d/1fop7xYQR1oTStW5JWd0W3AoNFeq6
jt-uxpokJD3t9Wg/edit?usp=sharing
