METHODOLOGY OF ECONOMETRICS
1. Statement of Economic 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.
, Statement of Economic Theory or Hypothesis
Keynes states that on average, consumers increase their
consumption as their income increases, but not as much as the
increase in their income.
So,
(MPC < 1)
MPC= Rate of change consumption( say in $) by change in
income.
1. Statement of Economic 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.
, Statement of Economic Theory or Hypothesis
Keynes states that on average, consumers increase their
consumption as their income increases, but not as much as the
increase in their income.
So,
(MPC < 1)
MPC= Rate of change consumption( say in $) by change in
income.
