Vector autoregressionVector autoregression (VAR) is a statistical model used to capture the relationship between multiple quantities as they change over time. VAR is a type of stochastic process model. VAR models generalize the single-variable (univariate) autoregressive model by allowing for multivariate time series. VAR models are often used in economics and the natural sciences. Like the autoregressive model, each variable has an equation modelling its evolution over time.
Simultaneous equations modelSimultaneous equations models are a type of statistical model in which the dependent variables are functions of other dependent variables, rather than just independent variables. This means some of the explanatory variables are jointly determined with the dependent variable, which in economics usually is the consequence of some underlying equilibrium mechanism. Take the typical supply and demand model: whilst typically one would determine the quantity supplied and demanded to be a function of the price set by the market, it is also possible for the reverse to be true, where producers observe the quantity that consumers demand and then set the price.
EconometricsEconometrics is an application of statistical methods to economic data in order to give empirical content to economic relationships. More precisely, it is "the quantitative analysis of actual economic phenomena based on the concurrent development of theory and observation, related by appropriate methods of inference". An introductory economics textbook describes econometrics as allowing economists "to sift through mountains of data to extract simple relationships". Jan Tinbergen is one of the two founding fathers of econometrics.
Ordinary least squaresIn statistics, ordinary least squares (OLS) is a type of linear least squares method for choosing the unknown parameters in a linear regression model (with fixed level-one effects of a linear function of a set of explanatory variables) by the principle of least squares: minimizing the sum of the squares of the differences between the observed dependent variable (values of the variable being observed) in the input dataset and the output of the (linear) function of the independent variable.
Supply and demandIn microeconomics, supply and demand is an economic model of price determination in a market. It postulates that, holding all else equal, in a competitive market, the unit price for a particular good, or other traded item such as labor or liquid financial assets, will vary until it settles at a point where the quantity demanded (at the current price) will equal the quantity supplied (at the current price), resulting in an economic equilibrium for price and quantity transacted.
