Editing Econometrics (section)

==Methods==
{{Main|Methodology of econometrics}}

''Applied econometrics'' uses theoretical econometrics and real-world [[economic data|data]] for assessing economic theories, developing [[econometric model]]s, analysing [[economic history]], and [[Economic forecasting|forecasting]].<ref>[[Clive Granger]] (2008). "forecasting",
''The New Palgrave Dictionary of Economics'', 2nd Edition. [http://www.dictionaryofeconomics.com/article?id=pde2008_F000161&edition=current&q=forecast&topicid=&result_number=7 Abstract.] {{webarchive|url=https://web.archive.org/web/20120518001935/http://www.dictionaryofeconomics.com/article?id=pde2008_F000161&edition=current&q=forecast&topicid=&result_number=7 |date=18 May 2012 }}</ref>

Econometrics uses standard [[statistical model]]s to study economic questions, but most often these are based on [[observational study|observational]] data, rather than data from [[experiment|controlled experiments]].<ref name=Introductory_econometrics>{{cite book |last=Wooldridge |first=Jeffrey |date=2013 |title=Introductory Econometrics, A modern approach |publisher=South-Western, Cengage learning |isbn=978-1-111-53104-1}}</ref> In this, the design of observational studies in econometrics is similar to the design of studies in other observational disciplines, such as astronomy, epidemiology, sociology and political science. Analysis of data from an observational study is guided by the study protocol, although [[exploratory data analysis]] may be useful for generating new hypotheses.<ref>[[Herman Wold|Herman O. Wold]] (1969). "Econometrics as Pioneering in Nonexperimental Model Building", ''Econometrica'', 37(3), pp. [https://www.jstor.org/pss/1912787 369] {{Webarchive|url=https://web.archive.org/web/20170824221048/http://www.dictionaryofeconomics.com/article?id=pde2008_E000186&q=Experimental |date=24 August 2017 }}-381.</ref> Economics often analyses systems of equations and inequalities, such as [[supply and demand]] hypothesized to be in [[Economic equilibrium|equilibrium]]. Consequently, the field of econometrics has developed methods for [[parameter identification problem|identification]] and [[estimation theory|estimation]] of [[simultaneous equations model]]s. These methods are analogous to methods used in other areas of science, such as the field of [[system identification]] in [[systems analysis]] and [[control theory]]. Such methods may allow researchers to estimate models and investigate their empirical consequences, without directly manipulating the system.

In the absence of evidence from controlled experiments, econometricians often seek illuminating [[natural experiment]]s or apply [[Quasi-experiment|quasi-experimental methods]] to draw credible causal inference.<ref>{{cite journal |last1=Angrist |first1=Joshua D. |author-link=Joshua Angrist|last2=Pischke |first2=Jörn-Steffen |title=The Credibility Revolution in Empirical Economics: How Better Research Design is Taking the Con out of Econometrics |journal=Journal of Economic Perspectives |date=May 2010 |volume=24 |issue=2 |pages=3–30 |doi=10.1257/jep.24.2.3 |issn=0895-3309|doi-access=free |hdl=1721.1/54195 |hdl-access=free }}</ref> The methods include [[regression discontinuity design]], [[Instrumental variables estimation|instrumental variables]], and [[Difference in differences|difference-in-differences]].