Econometrics models

They are deterministic and based on statistically established historical relationships. Such models are used not only to produce quantitative forecasts but also to estimate the sensitivity of outcomes to any changes in the variables included in the models. Expert judgment collection methods can be used to obtain estimates of the independent variables used in sensitivity analysis. Scenarios can provide the backdrop for econometric analyses and help ensure the internal self-consistency of external assumptions. In the case of technology sequence analysis, the range of dates at which the intermediate technologies or final system will be available could become probabilistic rather than deterministic. To accomplish this, simultaneous equations could be solved a large number of times and the results displayed as a range of possibilities. Further, the outcomes could be tested to determine the sensitivity of the outcome to the probabilities of events and their interactions. Similarly, TIA can be used to create forecasts of external variables used in econometric models. The two main purposes of econometrics are to give empirical content to economic theory and also to empirically verify economic theory. Econometric analysis can often be divided into time-series analysis and cross-sectional analysis. Time-series analysis examines variables over time, such as the effect of interest rates on national expenditure. Cross-sectional analysis studies relationship between different variables at a point in time. When time-series analysis and cross-sectional analysis are conducted simultaneously on the same sample, it is called panel analysis. If the sample is different each time, it is called pooled cross-section data. Multidimensional panel data analysis is conducted on data sets that have more than two dimensions. Econometric analysis may be classified on the basis of the number of relationships modeled. Single equation methods rely on the assumption of a causal relationship between the variable of interest (the dependent variable) and the explanatory or exogenous variables. If this assumption is not satisfied, the results may be subject to simultaneous equations bias. A variety of simultaneous equation methods have been developed to take account of the fact that economic variables such as prices and quantities are, in general, jointly determined in market equilibrium. Much larger econometric models are used in an attempt to explain or predict the behavior of national economies.