Econometrics is system which, through studying economics and with the use of mathematical concepts, particularly those in the area of statistics, allows us to come up with theoretically sound analyses of various situations.
While the term itself may make the idea sound very theoretical in nature, and even though there are a lot of economists who study econometrics on this level, it is also quite useful for many practical applications. For instance, financial institutions can make use of certain analyses to understand current trends, as well as how changes in one area can affect factors such as interest rates or business solvency. News reporters who specialize in financial updates may take on the responsibility of interpreting data and explaining these to the public in terms of more empirical financial developments and changes. Since econometrics also takes into account events that happened in the past, it can help analysts arrive at sound predictions about how we should expect the economy to behave in the future.
Since econometrics relies heavily on statistics, it is very important to ensure the accuracy of the data being used in order to come up with a sound analysis. Slight changes in statistical data can lead to completely different results, so ensuring that the data is correct and free from analysts’ biases is crucial. In any case, results of any study may be validated by other researchers and analysts, so it may be beneficial to employ the help of other experts or get a second opinion to be reassured of a study’s accuracy.