Different approaches to study Econometrics!

11 Apr

Modern econometrics was articulated by studies of Trygve Haavelmo, who won Nobel Memorial Prize in Economic Sciences in 1989. He asserted that quantitative economic models must be probability models (or stochastic ones). Economic models should incorporate randomness, but deterministic models should not contain stochastic errors (these are systems in which no randomness is involved). Economic models contain some randomness that is why the best way to study them is by applying powerful theories of statistics.

Structural approach is the closest to Haavelmo’s original idea. A probabilistic economic model is specified, and analyses are performed under the assumption that economic model is correctly specified. This model is more viewed as an approximation. So this econometric analysis can be done under different interpretations. Quasistructural approach  view this econometric model  as an approximation rather than as a truth. This theory has led to concepts like :quasi-likelihood function, quasi-MLE. Semiparametric approach is an econometric model that is partially specified, but some features are left still unspecified. This type of studying implies using estimation methods, as: least-square and Generalized Method of Moments. This type of approach dominates contemporary econometrics.

Another branch of quantitative structural economics is calibration approach. This kind of approach interprets structural models as approximations and rather as false ones.


Leave a Reply (don't forget to subscribe) :

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: