CHAPTER I INTRODUCTION Chapter 1 Introduction 1.1 What is econometrics? Application of st atistical and mathematical met hods to the analysis of economic ● Purposes 1. Testing economic theories 2. Policy analysis(simultaneous equations model, vector autoregressive model 3. Forecasting History See Mary Morgan's(1990)"The History of Econometric Ideas(Cambridge Un P 1.2 Econometric model Consist s of several equations derived from economic theory and reasoning Example 1 Consumption function Ct=a+BY+yrt +Et Ct: aggregate consumption observed at period t Yt: total income observed at period t rt: interest rate ob served at period t ut error term 1.3 Tools for econometrics Economics, mathematics, proba bility, st atistics, computation 1. 4 Research outlet Journals: Econometrica, Econometric Theory, Econometric Journal, Journal of Econometrics, Journal of Applied Econometrics Handbooks: Handbook of Econometrics, Handbook of Applied Econometrics, Pal grave Handbooks of Econometrics, etc.(contain review articlesCHAPTER 1 INTRODUCTION 1 Chapter 1 Introduction 1.1 What is econometrics? • Application of statistical and mathematical methods to the analysis of economic data. • Purposes 1. Testing economic theories 2. Policy analysis (simultaneous equations model, vector autoregressive model) 3. Forecasting • History See Mary Morgan’s (1990) “The History of Econometric Ideas” (Cambridge Univ. Press) 1.2 Econometric model • Consists of several equations derived from economic theory and reasoning Example 1 Consumption function ct = α + βYt + γrt + εt ct : aggregate consumption observed at period t Yt : total income observed at period t rt : interest rate observed at period t ut : error term 1.3 Tools for econometrics • Economics, mathematics, probability, statistics, computation. 1.4 Research outlet • Journals: Econometrica, Econometric Theory, Econometric Journal, Journal of Econometrics, Journal of Applied Econometrics, · · · • Handbooks: Handbook of Econometrics, Handbook of Applied Econometrics, Pal￾grave Handbooks of Econometrics, etc. (contain review articles)