Econometric models are statistical equations used in econometrics that determines the statistical relationship between different economic quantities. The three primary goals of econometrics are structural analysis, forecasting, and policy evaluation. Econometricians measure past relationships between different variables such as household income, tax rates, employment, and interest rates. The information from these relationships are then used in an equation to try to forecast how changes in some variables will affect others in the future.

Econometric models are modelled after an equation that relates a dependent variable to a variety of independent determingin economic factors. Simple models can be ones such as a linear regression using an OLS estimator (Ordinary Least Squared). More complex models can involve time-series, autoregressions, moving averages, etc. Different models have idfferent applciations and will produce various levels of accuracy and significance depending on the situation and the available data.

Econometric models are a cornerstone to applied economics and are necessary to prove the validity of any sort of model or conjecture. It is commonly used to distinguish and determine correlations, causations, and counterfactual information.

© BrainMass Inc. brainmass.com December 14, 2018, 1:37 am ad1c9bdddf