Answer to Question #210280 in Microeconomics for Mellei

Question

Using practical examples, outline how you could go about undertaking an econometric analysis. (8marks)

Answer 1

Broadly speaking, this is how I could go about undertaking an econometric analysis:

1. Statement of theory or hypothesis.

2. Specification of the mathematical model of the theory

3. Specification of the statistical, or econometric, model

4. Collecting the data

5. Estimation of the parameters of the econometric model

6. Hypothesis testing

7. Forecasting or prediction

8. Using the model for control or policy purposes.