Econometrics

4 April 2015
A mathematical analysis of economic problems. Discusses advantages, goals, methods, models, applications and limitations.

APPLICATION OF MATHEMATICAL METHODS IN ECONOMIC ANALYSIS

When mathematical methods and statistical techniques are applied to the analysis of economic problems and issues, the term usually applied to the process of applied economics is econometrics (Ekelund & H?bert, 1991, p. 372). The goal of econometrics is the development of valid, reliable, and value free predictive models of economic phenomena.
Alan Greenspan (1991, p. 52), Chairman of the Federal Reserve Board, stressed the importance of econometric models as a means of providing a clear understanding of economic events. He argued that the greatest advantage of a “fully articulated model is that it helps the forecaster keep track of the interrelationships among the primary variables of interest” (Greenspan, 1991, p. 53). Within the context of this argument, he …

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