Steps in Econometric Analysis

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Steps in Econometric Analysis

• Analysis is motivated by a desire to understand a
  phenomenon better
• The steps in an econometric analysis
• A theory about the phenomenon
• Express the theory as a model specification
• A mathematical, statistical, or econometric
  statement with variables parameters
• Obtain data for the variables specified
• Estimate numerical values of parameters
• Test the model to see how good it is
• Use the model for forecasting or policy

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Terms to know and understand 1

• Variables
• Dependent, predicted, explained, endogenous,
  response, regressand, controlled, etc.
• Independent, predictor, explanatory, exogenous,
  stimulus, regressor, control, etc.
• Error, disturbance, error, deviations
• Policy
• Control
• Target
• Parameters, coefficients
• Slope
• Intercept

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Terms to know and understand 2

• Model types
• Theoretical or applied
• Classical or Bayesian
• Relationships
• Correlation vs. causation
• Data types
• Time series annual, quarterly, monthly, weekly,
  daily , hourly, etc.
• Cross section
• Pooled

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Terms to know and understand 3

• Properties of variables based on measurement
  scales
• (1) X1/X2 is meaningful
• (2) X1-x2 is meaningful
• (3) Order of x1, x2 is meaningful
• Types of variables based on properties
• Ratio scale variable (1) (2) (3)
• Interval variable (2) (3)
• Ordinal variable (3)
• Nominal variable None of the 3

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