Econometrics involves applying statistical tools to economic data to analyze economic phenomena numerically. It uses economic theory, mathematics, and statistics. The methodology of econometrics includes: 1) Stating an economic theory or hypothesis, 2) Specifying a mathematical model of the theory, 3) Specifying an econometric model, 4) Obtaining data, 5) Estimating the parameters of the econometric model using regression analysis, and 6) Testing hypotheses and using the model for forecasting, prediction, control or policy purposes.

1. Refresher Course Seminar
on
Introduction to Econometrics
By
Dr. C. RAJENDRAN
Dept. of Economics
Govt. Arts College, Coimbatore-18

2. WHAT IS ECONOMETRICS?
Econometrics means “Economic measurement”
An application of mathematical statistics to
economic data to obtain numerical results
The tools of economic theory, mathematics,
and statistical tools are applied to the analysis
of economic phenomena.

3. METHODOLOGY OF ECONOMETRICS:
How do econometricians proceed their
analysis of economic problem?
1. Statement of theory or hypothesis
(Ex: positive relationship between consumption
and income)
2. Specification of the mathematical model of
the theory Example : C = f (Y)

4. 3. Specification of the econometric
model
Y = β1 + β2X+u
Where
Y = consumption expenditure and
X = income, and
β1 and β2, known as the parameters of the model,
u = error term
4. Obtaining the data

5. 5. Estimation of the parameters of the
econometric model
statistical technique of regression analysis is the main
tool used to obtain the estimates.
6. Hypothesis testing
We have to develop suitable criteria to find out
whether the estimates obtained are in accord with
the expectations of the theory that is being tested.

6. 7. Forecasting or
prediction
8. Using the model for
control or policy purposes

7. Therefore Econometrics…….
Economic theory,
Mathematical model of theory,
Econometric model of theory,
Data,
Estimation of econometric model,
Hypothesis testing,
Forecasting or prediction.