An Introduction to Quantitative Economics

Brian Haines

• Publisher: Taylor & Francis
• Year: 2018
• eBook ISBN: 9781351140782
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Originally published in 1978. This book is designed to enable students on main courses in economics to comprehend literature which employs econometric techniques as a method of analysis, to use econometric techniques themselves to test hypotheses about economic relationships and to understand some of the difficulties involved in interpreting results. While the book is mainly aimed at second-year undergraduates undertaking courses in applied economics, its scope is sufficiently wide to take in students at postgraduate level who have no background in econometrics - it integrates fully the mathematical and statistical techniques used in econometrics with micro- and macroeconomic case studies.

Part One

Chapter 1

Introduction to the Relationship between Variables

Econometrics

There is at present a rapid growth in the demand for a basic working knowledge of econometric techniques. This is due to a desire to understand and to be able to comment on attempts that have been made to test economic theorems empirically and to forecast future events. For example, the results of applying econometric techniques are used as a basis for considering the efficacy of monetary as opposed to fiscal policy or the merits of cost-push as opposed to demand-pull theories of inflation. The use of such techniques is probably the most powerful tool in the hands of an economist since they enable him or her to test the validity of certain ideas or hypotheses when these are applied to real world data.

Econometrics is concerned with both measuring and analysing economic relationships. The meaning of the word ‘econometrics’ is derived from the Greek words for economy and measure, and it has been suggested that this field of economics has its origins in the fifteenth century (see Schumpeter, 1954). Econometrics has the following uses:

1. Testing alternative theories in economics. For example, it may be discovered whether the rate of interest or the rate of increase in output is the more important determinant of investment expenditure.
2. Providing empirical evidence for use in policy decisions. For example, the econometrician can estimate the marginal propensity to consume, which provides an estimate of the simple multiplier; this in turn provides the Chancellor of the Exchequer with a means of estimating the effect that cutting government expenditure by some given amount will have on national income. An alternative example from the field of microeconomics is the estimation of the elasticity of demand for a particular commodity by an econometrician, from which the producer or seller of the good can estimate the effect that a planned increase in price will have on total revenue. A question very near the heart of every commuter on British Rail is: ‘Would total revenue actually increase if British Rail were to reduce rather than increase its fares?’
3. Providing forecasts for economic variables. For example, short-term macroeconomic forecasting has been carried out at the National Institute of Economic and Social Research (NIESR) for over fifteen years, and their results are published quarterly i...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Preface
• Part One
• Part Two
• Numerical Answers
• References
• Further Reading
• Index