Introduction to Quantitative Economics

Quantitative economics deals with the measurement and analysis of economic phenomena. Understanding and applying quantitative economic methods requires in-depth knowledge of mathematics, statistics and research methodologies. Economists and business analysts use quantitative methods to quantify theories and predict future conditions.

Identification

Economics students learn quantitative economic methods in advanced undergraduate and graduate courses. Economists refer to the field of quantitative economics as econometrics, which means “economic measurement,” according to economist Damodar N. Gujarati.

Function

Economist A.H. Studenmund, author of “Using Econometrics,” writes that econometric analysis enables researchers to describe economic reality, test hypotheses about economic theories and produce forecasts of future economic and business activity.

Features

Much quantitative economic work involves use of regression analysis, which Studenmund writes is a technique by which researchers estimate the strength of economic relationships that have been postulated in theory. For example, econometric researchers might ask how much the demand for a good will increase with each dollar of decrease in the price of that good.

Benefits

Studenmund writes that quantitative economics enables economists to quantify economic theory, bridging the gap between abstract theory and real-world economic and financial phenomena.

Considerations

Effective use of quantitative economic methods requires knowledge of calculus, matrix algebra and statistics. It also requires computer skills, as econometric researchers use statistical software to analyze quantitative economic data.

References

• Basic Econometrics, Damodar N. Gujarati, 1996
• Using Econometrics, A.H. Studenmund, 1999

Resources

• Econometrics: Definition