RELATING MACROECONOMIC MODELS, ITS USES AND ECONOMIC ANALYSIS TO THE PURPOSE OF ECONOMETRICS

 RELATING MACROECONOMIC  MODELS, ITS USES AND ECONOMIC  ANALYSIS TO THE PURPOSE OF  ECONOMETRICS            Macroeconomic models a...

 RELATING MACROECONOMIC  MODELS, ITS USES AND ECONOMIC  ANALYSIS TO THE PURPOSE OF  ECONOMETRICS
      

    Macroeconomic models are models  of the economy specified in the form of mathematical equation and it is use to explain key economic aggregates. Its is the simplification and representation of aggregate economic which examine the interrelations, determination and causes of fluctuations among various aggregates.

Macroeconomic models are use ;

1. To study,examine and explain the workings of an economy and its key sectors.

2. For forecasting or predicting the future level of key economic aggregates in such economy.

3. To  control the level and rate of change of key economic aggregates.

  Macroeconomic model contribute to a better understanding of the operations of the economy . The first two uses fall under positive or analytical economic analysis while the last one fall under the heading of normative economics analysis because the models facilitates better policy and decision making.

 The study of Econometrics is important in the aspect of  structural analysis ,forecasting and policy evaluation . structural analysis involves testing and verification of economic theories . Testing of theories  requires studying ,examining and explaining the workings of the economy and its sectors.

 Forecasting or prediction depends on how the variables ,parameters and data are correctly specified . The parameters in a macroeconomic model are generally estimated using econometric techniques and relevant data . This invariably means forecasting of a macroeconomic model will be impossible without the use of Econometric technique.

Policy evaluation entails how the supply of estimates and the coefficient of economic relationship are controlled .

  Positive economics analysis is aimed at studying, examining and explaining the workings of an economy; its sector and also predicting the future level of key economic aggregates. It involves Theories => Data collection =>Knowledge (economic laws,explanation and prediction).
Normative economics analysis uses the knowledge derived from positive economics as a basic building block which deals with the value judgment of what ought to be or ought to become . It involves The knowledge gotten from Positive study => Desired goals => problem identification => Policy proposal.

 The purpose of studying applied econometrics is for Analytical economics which involves structural analysis and forecasting and Normative economics which involves policy evaluation.

REFERENCE

Iganiga, B.O.(2012). Macroeconomics: Concept,Theory and Applications. Antitop Books. P. 20-24.