Business Management Skills

“Economists are frequently interested in relationships between different quantities, for example between individual wages and the level of schooling. The most important job of econometrics is to quantify these relationships on the basis of available data and using statistical techniques, and to interpret, use or exploit the resulting outcomes appropriately” (A Guide To Modern Econometrics, Marno Veerbeek, 2008). In essence, this technique combines basic economics, observed data and statistical methods. The textbook goes on to say, “It is the interaction of these three that makes econometrics interesting, challenging and, perhaps, difficult.”

Initially, econometrics was used as a partner to macroeconomics. The large-scale theories of how whole economies are affected by variables like wages, prices, stock values or tariffs could be tested using hundreds of equations. Out of all this data would come a coherent policy and a forecast of what was possibly to come. Since the seventies, the focus of this technique has been to examine microeconomics variables like individual behavior, household behavior or private firm behavior. Surveying and market research have added increased opportunities to empirically understand how financial markets work.

For people without formal training and advanced levels of study in applied economics, the language of econometrics can be overwhelmingly complex. Perhaps this is why most students never really hear about it until their third or fourth year of economics college. Journalists often report the end results and findings of economists when they talk about housing market trends or labor economics predictions, but much of the back-end work is never seen or understood by the public. Today, econometric experts are needed by large corporations, financial institutions, public administrations and research institutes who require quantitative methods of analyzing data, forecasting, modeling and forming policy.

Like other economics statistics, econometrics is often slammed by critics who feel the results can be inaccurate. After all, predictions of the future must be made based on current data only, without withstanding the test of time. Also, if economists accidentally measured a relationship linearly, when it should be curved, they may produce incorrect findings. Relying too heavily on statistics, without considering what forces shaped those statistics, could be a serious flaw in the study. Even so, people’s insatiable demand to see what lies ahead has created an opening for intelligent individuals to fuse math and economic theory together to create assumptions based on logic and probability.

Beth Kaminski is the co-author of Curing Your Anxiety And Panic Attacks which detailed panic attacks help as well as tips on the various anxiety attack medication available at anxietydisordercure.com.