Econometric model
Econometric models are statistical models used in econometrics. An econometric benefit example specifies the statistical relationship that is believed to hold between the various economic quantities pertaining to a specific economic phenomenon. An econometric model can be derived from a deterministic economic model by allowing for uncertainty, or from an economic model which itself is stochastic. However, it is for also possible to usage econometric models that are non tied to all specific economic theory.
A simple example of an econometric model is one that assumes that monthly spending by consumers is linearly dependent on consumers' income in the previous month. Then the model will consist of the equation
where Ct is consumer spending in month t, Yt-1 is income during the previous month, and et is an error term measuring the extent to which the model cannot fully explain consumption. Then one objective of the econometrician is to obtain estimates of the parameters a and b; these estimated argument values, when used in the model's equation, provides predictions for future values of consumption to be presented contingent on the prior month's income.