Econometrics
Econometrics applies statistical methods to economic data to quantify how variables are related and to test whether economic theories hold empirically.
See it move
The scatter-line chart plots household income (€000s) on the horizontal axis against consumer spending (€000s) on the vertical axis, with an OLS-fitted regression line running through the observed data points. The caption states that the OLS estimate implies every €1,000 rise in household income is associated with approximately €680 more in consumer spending. This example shows how econometrics translates an economic theory about the income-spending relationship into a quantified, testable linear estimate.
Check yourself
An analyst uses regression to estimate that each additional year of business experience is associated with €3,200 more in annual revenue, and reports a standard error of €850 around this estimate. Which feature of econometrics does this standard error most directly exemplify?