Econometric Theory and Practice
One of the main goals of economics is to understand the impact of economic variables on society and to improve welfare by choosing an appropriate policy. For economic theory to stand the test of reality, it must be consistent with empirical evidence, which verifies or refutes the theory, and measures the nature of the relationships between economic variables.
The empirical test is the essence and role of econometrics, a standard that combines the terms of Economics and Metrics. This is the facet of the discipline that attempts, through statistical and mathematical tools, to add the quantitative content to economic models. In other words, econometrics is at the heart of empirical analysis of the science of economics.
A distinction must be made between applied econometrics and theoretical econometrics. Applied econometrics usually begins with a theoretical model, constructed by observing economic data or in another inductive way. Data is then applied to support or refute the model under consideration. Theoretical econometrics involves developing appropriate methodologies for applications and empirical research.
Although the term Econometrics is literally associated with the field of economics, there are econometric methods that have been adopted in a wide variety of fields, such as: finance, transportation, law, physics, biology, electrical engineering and more.