National open university of nigeria introduction to econometrics I eco 355

4.0 
CONCLUSION 
In econometrics, the modeler is often faced with observational as opposed to 
experimental data. This has two important implications for empirical modeling in 
econometrics. The modeler is required to master very different skills than those needed 
for analyzing experimental data and the separation of the data collector and the data 
analyst requires the modeler familiarize himself/herself thoroughly with the nature and 
structure of data in question. 
5.0 
SUMMARY 
The units vividly look at the meaning of econometrics which is different from the modern 
day to day calculation or statistical analysis we are all familiar with. However, the units 
also discuss the reasons why econometrics is studied differently from other disciplines in 
economics and how it is so important in formulating and forecasting the present to the 
future. 
6.0 
TUTOR MARKED ASSIGNMENT 
1. 
Differentiate between mathematical equation and models. 
2. 
Explain the term ‗Econometrics‘. 
7.0 
REFERENCES/FURTHER READINGS 
Gujarat, D. N. (2007) Basic Econometrics, 4
th
Edition, tata Mcgraw – Hill publishing 
company limited, New Delhi. 
Hall, S. G., & Asterion, D. (2011) Applied Econometrics, 2
nd
Edition, Palgrave 
Macmillian, New York city, USA. 

---

17 
UNIT 2 
METHODOLOGY OF ECONOMETRICS 
CONTENTS 
1.0
Introduction 
2.0
Objectives 
3.0
Main content 
3.1. Traditional Econometrics Methodology 
4.0 
Conclusion 
5.0 
Summary 
6.0
Tutor-Marked Assignment 
7.0 
References/Further Readings 
 
1.0
 
INTRODUCTION 
 
One may ask question that how economists justifies their argument with the use of 
statistical, mathematic and economic models to achieve prediction and policy 
recommendation to economic problems. However, econometrics may also come inform 
of applied situation, which is called applied econometrics. Applied econometrics works 
always takes (or, at least, should take) as its starting point a model or an economic theory. 
From this theory, the first task of the applied econometrician is to formulate an 
econometric model that can be tested empirically and the next task is to collect data that 
can be used to perform the test and after that, to proceed with the estimation of the model. 
After this estimation, an econometrician performs specification tests to ensure that the 
model used was appropriate and to check the performance and accuracy of the estimation 
procedure. So these process keep on going until you are satisfied that you have a good 
result that can be used for policy recommendation.