What is econometrics?
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- Опубліковано 29 вер 2024
- This video provides an introduction to the subject of econometrics, using a few examples to explain the sorts of question which are likely to be encountered.
In this video I want to talk about what actually do we mean by econometrics. So econometrics is in general a statistical tool set which helps us to evaluate some sort of relationship of interest. An example might be we're interested in, for individuals, what is the effect of an individual's level of education on the average wage which that individual might expect to obtain. So if an individual's level of education increases we might expect that the level of wages which an individual obtains on average might increase. So if I was to plot a graph of the level of education of individuals on the x-axis, against the wages which a group of individuals have obtained on the y-axis, then we might hope to see some sort of positive correlation between these two variables. That's not to say that is necessarily a causal relationship only that there is some sort of positive relationship between these two variables. Econometrics help us to quantify this degree of correlation by in a sense drawing a line through the centre of all those points. And by drawing a line through the centre of all those points we are hoping to capture what is the average effect of education on wages. So on average an individual who has years of education, might expect to obtain a wage which is let's say four hundred dollars. Whereas an individual perhaps if they had a year's worth of education might expect back their wages to go up by a hundred dollars. So they now earn five hundred dollars. Well econometrics is a toolset for finding out what the strength of this relationship is. So how much do wages actually go up by. And this type of relationship here where we're concerned with the relationship for individual people or individual firms is the subject of microeconometrics. And it's called microeconometrics for analogy with microeconomics. Another sort of microeconometric relationship we might be interested in might be, 'What is the effect of TV advertising on a company's level of sales. So if I was to draw a graph of a company's level of sales over time then we might have something which looks something like this. If there is some sort of seasonality. Perhaps this is coffee sales or ice cream sales. And we might be interested in do these peaks which we observe in the data - are they caused by TV advertising? And TV advertising might look something like these bars that I have drawn below. So econometrics is a way of understanding for this time series data does this TV advertising here cause sales to go up? And similarly does this TV advertising here cause sales to go up. So this is slightly different to the previous example in that we are dealing with what we call time series data, whereas the original data was what we call cross-sectional data. But it's still actually what we call Microeconometric data because we are dealing with data for a particular firm. Another type of econometrics is the subject of macroeconometrics and macroeconometrics as its name suggests is to deal with macro relationships. So an example here might be what is the effect of interest rate falls on inflation. So traditional economic theory suggests that if the interest rate falls then the inflation rate should increase because of increases in aggregate demand. So econometrics is a way of quantifying that particular relationship. So all of these relationships are variations on the same sort of theme which we see time and time again in econometrics. So the idea with econometrics is that there is some sort of population or in the case of time series data we actually call this a data generating process but you can kind of think about it for now at least in terms of a population. And within this population there is some sort of true relationship between the variables which are interested in. So there might be some sort of true relationship between an individual's level of wages and let's say their level of education. So in this example here beta quantifies the effects of one year of education on an individual's level of average wages. But there are other factors which also determine wages, which we group together in our population error 'u', which are all these other idiosyncratic factors which affect an individual's level of wages. So an example might be 'where does the individual live?' Are they based in OECD countries for example? What are their interests? Are they interested in pursuing a career where they earn lots of money like an investment banker or are they interested in going into the civil service for example? Those are the sorts of things which are contained within the population error 'u'... Check out ben-lambert.co... for course materials, and information regarding updates on each of the courses.
Hi Wendy, thanks for your message. I am planning to do more videos on microeconometrics in the next few weeks; I already have some on cross-sectional models which are applicable to microeconometrics, but am going to do some more videos on panel models and logit/probit and maximum likelihood estimators in the next 2 weeks. Do you have any particular requests? Thanks, Ben
Sir can you help me with , what is the difference between these fields: masters in economics, applied economics, econometrics, and business economics. Will be so thankful and grateful to you. Hoping for your reply .
What a wonderful series!
Hi Ben, Could you tell me the primary book(s) or any reading material that you are using for these videos? Thanks!
Thank you for the videos. Will you do videos about Microeconometrics sometime later? I am using them to catch up with my lessons of Microeconometrics...
Hi, glad to hear you liked it, and it was helpful! Best, Ben
Thank You Ben.Until now Econometrics seemed to be a very heavy term with mumbo jumbo in it.Now it doesn't. Although I still realize that it is very complicated.
:)
I wonder if you would be able to do a video on the underlying fundamental difference between econometrics and data science. Thank you for the amazing videos!
thank you so much!! i was bothered by econometrics a lot, until i meet your videos on youtube!
Econometrics is really big science and people will understand its importance soon. They have to learn.
Awesome! I am also taking the course: Panel Data Analysis of Microeconomic Decisions...if you could including STATA, or other statistical softwares that would be helpful...Anyway, you are just brilliant...
Thanks so much for the video. It helps me so much on understanding the basic of Econometrics :)
Thanks for taking time to do the videos. They help a hellav a lotta!
Thank you very much for the tutorial, what subjects in statistic and math do you recommend to refresh before I start econometrics.
could you make a video about dummy variables, chow test?
very informative video = thank you
hey Ben thanks for this useful video.i study computer science.and we also make predictive models .i saw ,there are lots of models in econometric for different sort of problems(if variables are first unit root or not ,...)we never care about them in creating out models! so what is the difference between making models with machine learning methods and econometric methods?
Hi Ben! Thanks a lot for your efforts and sharing your knowledge! I have a question about the causal relationship you mentioned in this video. In 1:00, you said "that's not to say that is necessarily a causal relationship" but in 3:02 said "Econometrics is a way of understanding for this time series data, does this TV advertising here CAUSE sales to go up?". Probably I'm wrong but it seems a bit contradictory. Could you help me understand this?
I think he's making the assumption as in this case we have the context as well, which let's us know that it's more likely to be causation
@@marioventura6055 It makes sense. Thanks a bunch for your help! Have a great day! ;)
Cause was used in context of the term, but what he means is that there is evidence pointing towards (indicating) a positive correlation between the two variables.
Hi Wendy, I have made some videos on panel data now, and am starting some on logit and probit. Have a look at my channel homepage for these videos (for some reason UA-cam won't let me post you a link to them?) Hope all is well, Best, Ben
lol this vid let me know that the problems wasn't on me but the professor...
Sir may I study in hindi language
Please help me
awesome, I would say though that econometrics doesn't provide a way to understand if one set of data causes the other, wich is the area of economic reasoning and social sciences, but provides a statistical scenario that may be valuable to human interpreting.
is there any books for UG studentsto understand deeply
Your videos help me a lot!Really appreciate you for your selflessness of knowledge.
Any textbook required for this course?
Pedazo de video gracias me generaste más intriga y curiosidad por la economía de la que ya tenía.
Thanks for the videos Ben, I know this isn't the important part of the video, but I'm wondering why a fall in interest rates would lead to an increase in inflation. I've tried to look online but I keep seeing interest and inflation moving in the same direction. Is it because a fall in interest results in more investment (because it is cheaper) which increases money supply in the economy resulting in businesses raising prices to get a bigger profit?
What I'm reading is that a higher inflation rate results in a lower real return so in order to compensate for higher inflation, interest rates would need to rise in order for investments to be worth it.
as you side "fall in interest results in more investment which increases money supply" that also means lower saving and more spending which higher goods demand. In my point of view, higher money supply and higher goods demand influence higher goods price will result in higher inflation.
A fall in interest rates encourages consumers and firms to borrow money and to spend said money. This in tern results in an increase in aggregate demand as both consumption spending (consumers) and investment spending (firms) are key components of aggregate demand. (Aggregate demand consists of consumption spending +investment spending + government spending + (exports-imports) (C+I+G+(X-M)) )
@@billgytes2944 what subject is this? I want to study this very same thing... Graduate programs
thank you, watching from Indonesia
nice explanation
Thanks❤🧡
Do you need to be good at math to understand this ?
Shawn Afshar not really
Shawn Afshar yes its only math
No, it’s common sense
@@goldeng4889 math is common sense
@@goldeng4889 every science is 'common sense' then. That's just a stupid argument. I study econometrics and you either need to be excellent at math or willing to work very hard to compensate for it
Good video but stop saying 'sort of' please
People who don’t spend always have most to complains.