In this chapter I provide an introductory discussion of what econometrics is and what econometricians do. Next, I consider a more detailed motivation for writing this book. Finally, I give an outline of the other chapters of the book.

What is econometrics?

Econometric techniques are usually developed and employed for answering practical questions. As the first five letters of the word “econometrics” indicate, these questions tend to deal with economic issues, although applications to other disciplines are widespread. The economic issues can concern macroeconomics, international economics, and microeconomics, but also finance, marketing, and accounting. The questions usually aim at a better understanding of an actually observed phenomenon and sometimes also at providing forecasts for future situations. Often it is hoped that these insights can be used to modify current policies or to put forward new strategies. For example, one may wonder about the causes of economic crises, and if these are identified, one can think of trying to reduce the effects of crises in the future. Or, it may be interesting to know what motivates people to donate to charity, and use this in order to better address prospective donors. One can also try to understand how stock markets go up – and, particularly, how they go down – in order to adjust investment decisions.