Econometric models

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These are simply mathematical or statistical representations. They highlight the relationships between two or more variables. Econometric models are generally composed of :

– an endogenous variable that depends on the company’s decisions: the price of products, the profits generated, etc.
– several exogenous variables that are independent of the firm’s decisions. For example, the size of the population,
– some errors.

Econometric models are used for different purposes. For example, they are used to formulate sales strategies and to predict the growth rate of GDP in a country. They are also used, for example, to assess the impact of a subsidy on the target population.

Today, there are different econometric models. Depending on the nature of the information used, they can be :

– time series. These data concern a single variable and are collected progressively over time,
– cross-sectional data: which are collected by an individual at a specific time.