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Econometrics can be defined as:
The use of statistical methods to describe economic data and systems. Econometrics is a combination of economics, mathematical economics and statistics to provide numerical values to the parameters of economic relationships.
Econometrics measures economic relationships. Relationships in economic theories are experessed in mathematical formats and combined with empirical economics. Values of parameters are obtained using econometric methods. These values are nothing but the coefficietns of the mathematical form of the economic relationships.
According to the IMF (International MOnetary Fund):
1. Econometrics uses economic theory, mathematics and statistical inference to quantify economic phenomena and converts theoretical economic models into tools for economic policy making.
2. The objective of econometrics is to convert qualitative statements into quantitative statements.
3. Economists who practice econometrics are called econometricians. Econometricians transform models developed by economic theorists into versions that can be quantified or estimated.
According to Stock and Watson (2007):
econometric methods are used in many branches of economics, including finance, labor economics, macroeconomics, microeconomics, and economic policy.
The three primary goals of econometrics are as below:
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