- /i kon'euh me"triks/, n. (used with a sing. v.) Econ.the application of statistical and mathematical techniques in solving problems as well as in testing and demonstrating theories.[1930-35; see ECONOMY, METRIC2, -ICS]
* * *Statistical and mathematical analysis of economic relationships.Econometrics creates equations to describe phenomena such as the relationship between changes in price and demand. Econometricians estimate production functions and cost functions for firms, supply-and-demand functions for industries, income distribution in an economy, macroeconomic models and models of the monetary sector for policy makers, and business cycles and growth for forecasting. Information derived from these models helps both private businesses and governments make decisions and set monetary and fiscal policy. See also Ragnar Frisch; macroeconomics; microeconomics.
* * *▪ economic analysisthe statistical and mathematical analysis of economic relationships, often serving as a basis for economic forecasting. Such information is sometimes used by governments to set economic policy and by private business to aid decisions on prices, inventory, and production. It is used mainly, however, by economists to study relationships between economic variables.Early econometric studies attempted to quantify the relationship between the price of a commodity and the amount sold. In theory, the demand individual consumers have for particular goods and services will depend on their incomes and on the prices of items they intend to buy. Changes in price and income are expected to affect the total quantity sold.Early econometricians used market statistics compiled over time to study the relationship between changes in price and demand. Others used family-budget statistics broken down by income level to estimate relationships between income and expenditure. Such studies show which commodities are elastic in demand (i.e., the quantity sold responds to changes in price) and which are inelastic (the quantity sold is less responsive to changes in price).Consumption patterns, however, are not the only phenomena studied in econometrics. On the producer side, econometric analysis examines production (production, theory of), cost, and supply (supply and demand) functions. The production function is a mathematical expression of the technical relationship between a firm's output and its various inputs (or factors of production). The earliest statistical analyses of the production function tested the theory that labour (labour economics) and capital are compensated according to their marginal productivity (marginal productivity theory)—i.e., the amount added to production by the “last” worker hired or the “last” unit of capital employed. Later analyses, however, suggest that the wage rate, when adjusted for price changes, is related to labour productivity.Econometric analysis has refuted some assumptions in cost theory. Work in the field of cost functions, for example, originally tested the theory that marginal cost (marginal-cost pricing)—the addition to total cost resulting from an increase in output—first declines as production expands but ultimately begins to rise. Econometric studies, however, indicate that marginal cost tends to remain more or less constant.Work in estimating supply functions has been confined mostly to agriculture (agricultural economics). Here the problem is to distinguish the effects of external factors, such as temperature, rainfall, and pestilence, from those of endogenous factors, such as changes in prices and inputs.After the mid-1930s the development of national income accounting and of macroeconomic (macroeconomics) theory opened the way for macroeconomic model building, which involved attempts to describe an entire economy in mathematical and statistical terms.The model developed by L.R. Klein and A.S. Goldberger in the United States after World War II was the forerunner of a large family of macroeconometric models. Constructed on an annual basis, it has been elaborated upon in a form known as the “Michigan model.” A later generation of models, based on quarterly data, permits the analysis of short-term movements of the economy and better estimates the lags between different variables.A model jointly constructed by the U.S. Federal Reserve (Federal Reserve System) Board, the Massachusetts Institute of Technology, and the University of Pennsylvania is specially designed to handle the entire monetary sector. It has a large number of financial equations with a detailed lag structure and supplementary equations to show the main directions of monetary influence on the economy. Similar models have been developed in a number of advanced industrial countries, and many have been constructed for developing economies as well.A major purpose in the development of macro models has been to improve economic forecasting and the analysis of public policy. Models have also been applied to the analysis of economic fluctuations and economic growth.
* * *
Look at other dictionaries:
econometrics — e*con o*met rics ([ e]*k[o^]n [ o]*m[e^]t r[i^]ks), n. the application of mathematics and statistics to the study of economic and financial data. [WordNet 1.5] … The Collaborative International Dictionary of English
econometrics — [ē kän΄ə me′triks΄, ikän΄ə me′triks] n. [ ECONO(MY) + METRICS] the use of mathematical and statistical methods in the field of economics to verify and develop economic theories econometric adj. econometrician [ē kän΄ōmə trish′ən] n … English World dictionary
Econometrics — Economics … Wikipedia
econometrics — the application of statistical and mathematical methods in the field of economics to test and quantify economic theories and the solutions to economic problems. Chicago Board of Trade glossary The quantitative science of modelling the economy.… … Financial and business terms
Econometrics — The application of statistical theories to economic ones for the purpose of forecasting future trends. Econometrics takes economic models and tests them through statistical trials. The results are then compared and contrasted against real life… … Investment dictionary
econometrics — noun plural but singular in construction Etymology: blend of economics and metric Date: 1933 the application of statistical methods to the study of economic data and problems • econometric adjective • econometrically adverb • econometrician noun … New Collegiate Dictionary
econometrics — noun The branch of economics that applies statistical methods to the empirical study of economic theories and relationships. See Also: econometric, econometrician … Wiktionary
econometrics — Economic analysis using a combination of empirical data, techniques of statistical estimation, and (usually) some form of multivariate analysis , such as regression analysis, applied to economic theory. Econometric models of the economy are used… … Dictionary of sociology
econometrics — eÂ·coÂ·noÂ·metÂ·rics || Éªâ€škÉ’nÉ™ metrÉªks n. method of examining economics processes using mathematical and statistical methods (building of mathematical models) … English contemporary dictionary
econometrics — [ɪˌkɒnə mɛtrɪks] plural noun [treated as sing.] the branch of economics concerned with the use of mathematical methods (especially statistics) in describing economic systems. Derivatives econometric adjective econometrical adjective… … English new terms dictionary