[...]... Gujarati: Basic Econometrics, Fourth Edition Front Matter © The McGraw−Hill Companies, 2004 Preface PREFACE BACKGROUND AND PURPOSE As in the previous three editions, the primary objective of the fourth edition of Basic Econometrics is to provide an elementary but comprehensive introduction to econometrics without... Goldberger, Econometric Theory, John Wiley & Sons, New York, 1964, p 1 4 H Theil, Principles of Econometrics, John Wiley & Sons, New York, 1971, p 1 1 Gujarati: Basic Econometrics, Fourth Edition 2 Front Matter Introduction © The McGraw−Hill Companies, 2004 BASIC ECONOMETRICS The art of the econometrician consists in finding the set of assumptions that are both sufficiently specific and sufficiently realistic to... discussion on econometric methodology, see David F Hendry, Dynamic Econometrics, Oxford University Press, New York, 1995 See also Aris Spanos, op cit Gujarati: Basic Econometrics, Fourth Edition 4 Front Matter © The McGraw−Hill Companies, 2004 Introduction BASIC ECONOMETRICS 1 Statement of Theory or Hypothesis Keynes stated: The fundamental psychological law is that men [women] are disposed, as a rule and... is not exact; it is subject to individual variation The econometric model of the consumption function can be depicted as shown in Figure I.2 Gujarati: Basic Econometrics, Fourth Edition 6 Front Matter © The McGraw−Hill Companies, 2004 Introduction BASIC ECONOMETRICS Consumption expenditure Y u X Income FIGURE I.2 Econometric model of the Keynesian consumption function 4 Obtaining Data To estimate... regression line) is shown in Figure I.3 11 As a matter of convention, a hat over a variable or parameter indicates that it is an estimated value Gujarati: Basic Econometrics, Fourth Edition 8 Front Matter Introduction © The McGraw−Hill Companies, 2004 BASIC ECONOMETRICS As Figure I.3 shows, the regression line fits the data quite well in that the data points are very close to the regression line From this... Suppose further the government believes that consumer expenditure of about 4900 (billions of 1992 dollars) will keep the unemployment rate at its Gujarati: Basic Econometrics, Fourth Edition 10 Front Matter © The McGraw−Hill Companies, 2004 Introduction BASIC ECONOMETRICS Economic theory Mathematical model of theory Econometric model of theory Data Estimation of econometric model Hypothesis testing Forecasting... I would like to thank my wife, Pushpa, and my daughters, Joan and Diane, for their constant support and encouragement in the preparation of this and the previous editions Damodar N Gujarati Gujarati: Basic Econometrics, Fourth Edition Front Matter Introduction © The McGraw−Hill Companies, 2004 INTRODUCTION I.1 WHAT IS ECONOMETRICS? Literally interpreted, econometrics means “economic measurement.” Although... how one chooses among competing econometric models 2 In Chapter 1, I discuss very briefly the measurement scale of economic variables It is important to know whether the variables are ratio xxv Gujarati: Basic Econometrics, Fourth Edition xxvi Front Matter Preface © The McGraw−Hill Companies, 2004 PREFACE scale, interval scale, ordinal scale, or nominal scale, for that will determine the econometric technique... Limits of Econometrics, Edward Elgar Publishing, Hants, England, 1990, p 54 7 T Haavelmo, “The Probability Approach in Econometrics,” Supplement to Econometrica, vol 12, 1944, preface p iii 6 Gujarati: Basic Econometrics, Fourth Edition Front Matter Introduction © The McGraw−Hill Companies, 2004 INTRODUCTION 3 jobs of the economic statistician It is he or she who is primarily responsible for collecting... dummy dependent variable regression models, provides a fairly extensive discussion of regression models that involve a dependent variable that is qualitative in nature The main focus is on logit Gujarati: Basic Econometrics, Fourth Edition Front Matter Preface © The McGraw−Hill Companies, 2004 PREFACE xxvii and probit models and their variations The chapter also discusses the Poisson regression model, which