Literally interpreted, Econometrics means “economic measurement.” Econometrics is the integration of economic theory, mathematics, and statistical techniques for the purpose of testing hypotheses about economic phenomena, estimating coeﬃcients of economic relationships, and forecasting or predicting future values of economic variables or phenomena. Econometrics is subdivided into theoretical and applied econometrics. Theoretical econometrics refers to the methods for measurement of economic relationships in general. Applied econometrics examines the problems encountered and the ﬁndings in particular ﬁelds of economics, such as demand theory, production, investment, consumption, and other ﬁelds of applied economic research. In any case, econometrics is partly an art and partly a science, because often the intuition and good judgment of the econometrician plays a crucial role.
Although measurement is an important part of econometrics, the scope of econometrics is much broader, as can be seen from the following quotations:
“Econometrics, the result of a certain outlook on the role of economics, consists of the application of mathematical statistics to economic data to lend empirical support to the models constructed by mathematical economics and to obtain numerical results.”
Econometrics may be defined as the quantitative analysis of actual economic phenomena based on the concurrent development of theory and observation, related by appropriate methods of inference.
Arthur S. Goldberger
Econometrics may be defined as the social science in which the tools of economic theory, mathematics, and statistical inference are applied to the analysis of economic phenomena.
Econometrics is concerned with the empirical determination of economic laws.
The art of the econometrician consists in finding the set of assumptions that are both sufficiently specific and sufficiently realistic to allow him to take the best possible advantage of the data available to him.
Adrian C. Darnell and J. Lynne Evans
Econometricians are a positive help in trying to dispel the poor public image of economics (quantitative or otherwise) as a subject in which empty boxes are opened by assuming the existence of can-openers to reveal contents which any ten economists will interpret in 11 ways.
The method of econometric research aims, essentially, at a conjunction of economic theory and actual measurements, using the theory and technique of statistical inference as a bridge pier.