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Analysis report on econometric methods

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Analysis report on econometric methods Economic researchers and authors present the approaches of econometric methods using diversified approaches. This is due to the diversified nature of econometric methods. The methods are a combination of statistical tools and economic theory that are used to analyze, structure and explain economic relations. The diversity of the variables and the linkages among the variables in an economic system forces different writers to use the models in their own unique way and describe a phenomenon, answer a research question and test a hypothetical relationship. These paper summarizes three different research articles and examines how thee different economic researchers perceive econometric methods In the article Forecasting construction industry demand, price and productivity in Singapore: The Box–Jenkins approach, Hua & Pin (2000) examines the versatility of the Box–Jenkins approach as n analysis and forecast univariate models. The study is done in the constructions industry and two forecasting measures of accuracy: the root-mean-square-error and the mean absolute percentage error were adopted to test the approach. The researchers conclude the model to have great predictive strength and is consistent. The researcher lists the demand model as the most accurate and the productivity model as the least accurate. The article Nominal interest rate effects on real consumer expenditure, James (1990) challenges the current economic models that measure the purchase of durable household goods as a factor of the variables expected and after-tax interest rates. Instead, the researcher shows that although there is a powerful effect of interest rates on household purchases, the interest rates operate on nominal not real rates. Furthermore, the effects of the nominal interest rates are not only on durable consumables but nondurables as well. The writer feels that the current econometric models fail to factors that affect the non-durables as well as those that arise as a result of excess borrowing constraints caused by rising nominal interest rates and the imposition of repayments limits as a percentage of income by lenders. As a result, consumer spending is more dependent on the nominal interest rates instead of the actual cash flow to households. References Hua, G. B., & Pin, T. H. (2000). Forecasting construction industry demand, price and productivity in Singapore: the BoxJenkins approach. Construction Management and Economics, 18(5), 607-618. Wilcox, J. A. (1990). Nominal interest rate effects on real consumer expenditure. Business Economics, 31-37.