Introduction - Types of Economic Data
(1) Time Series Data - Data observed at equally spaced intervals, ordered in time.
(2) Cross-Section Data - Data from a survey of households or firms collected at one point in time.
(3) Panel Data - Combined time-series and cross-section data.
The Steps in Econometric Work -
STEP 1 - Specification of an economic model
Consider two variables y and x.
A relationship has the general form
y = f(x)
STEP 2 - Specify a statistical or econometric model
Relationships among economic variables are inexact.
To recognize this add an error to obtain the model.
STEP 3 - Estimation of the parameters β1 and β2
Do the calculations given by the estimation rule.
This gives numeric estimates denoted by b1 and b2.
STEP 4 - Model Evaluation
Hypothesis Testing - Example - is the slope coefficient greater than one ?
Diagnostic Testing - Example - are the errors normally distributed ?
Prediction - Example - predict the level of the dependent variable y for a given value of the explanatory variable x.
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