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History of Econometrics

Econometrics is the application of statistical and mathematical methods to economic data. While the term was coined in 1910, Ragnar Frisch is credited with establishing econometrics in its modern sense in 1926. The field has evolved from early studies in the 1800s examining the relationships between supply/demand/price, to the development of statistical tools like OLS regression, correlation coefficients, and maximum likelihood estimation. Major milestones include the founding of the Econometric Society in 1930 and journal Econometrics in 1933, as well as recent innovations in time series analysis, forecasting models, and heteroskedasticity corrections.

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187 views2 pages

History of Econometrics

Econometrics is the application of statistical and mathematical methods to economic data. While the term was coined in 1910, Ragnar Frisch is credited with establishing econometrics in its modern sense in 1926. The field has evolved from early studies in the 1800s examining the relationships between supply/demand/price, to the development of statistical tools like OLS regression, correlation coefficients, and maximum likelihood estimation. Major milestones include the founding of the Econometric Society in 1930 and journal Econometrics in 1933, as well as recent innovations in time series analysis, forecasting models, and heteroskedasticity corrections.

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Berrak Kibar
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EC 331.

01

FALL 2014

What is Econometrics?
Although the first known use of the term "econometrics" was by Pawe Ciompa in
1910, Ragnar Frisch is given credit for coining the term in the sense that it is used today.

Historical evolution of Econometrics


1805: The method of least squares OLS by Legendre
1809: The method of least squares OLS by Gauss
1844: Logistic function developed by Pierre Franois Verhulst
1888: Correlation coefficient defining the linear relationship between
variables by Francis Galton
1896: Correlation coefficient by Karl Pearson
1870-1930: So many researches on statistical economics and applied economics. Gathering
economic data, interpreting and analyzing this data statistically and economically, research of
fitness of data and economic theory and hypothesis have been started in this period.
The very first statistical studies were generally about the relationship
between supply, demand and price in terms of products and their
quantitative expression.
1871 Jevons was the first who expressed the relationship between
quantity demanded and price with data
18951926 Calculation of correlation coefficient with time series (spurious correlation &
nonsense correlation concepts)
1900 - GaussMarkov theorem by Carl Friedrich Gauss and Andrey Markov: states that in
a linear regression model in which the errors have expectation zero and are uncorrelated and
have equal variances, the best linear unbiased estimator (BLUE) of the coefficients is given
by the ordinary least squares estimator.
1912-1922 - Maximum-likelihood estimation was recommended, analyzed and vastly
popularized by R. A. Fisher (although it had been used earlier by Gauss, Laplace, Thiele,
and F. Y. Edgeworth)
1

1926 The name Econometrics was first used in the sense of economic measurement by
Norwegian econometrician Ragnar Frisch.
1930- Econometrics Association was established in USA after Great Depression. Irving Fisher
was assigned as the first President of Econometrics Association.
1930- Monte Carlo simulation idea by Enrico Fermi and Stanislaw Ulam (1946)
1932 The journal of econometrics, Econometrica was founded. The first volume was
published in January 1933.
1933- Probit models developed by Gaddum and by Bliss (1934)
1944- Logit models inspired by probit models by Berkson
1945 Instrumental variables method developed by Olav Reiersol
1958- Tobit models, which explain the relationship between a non-negative dependent
variable and an independent variable by using a latent variable, developed by James Tobin
1980 White test for heteroskedasticity (non-constant variance problem)
1980- VAR models (Vector Autoregressions) made popular by Sims
1982- Generalized Method of Moments by Hansen
1991 -The definitive technical reference for VAR models by Ltkepohl
1994 - Updated surveys of VAR techniques by Watson and by Ltkepohl (1999), Waggoner
and Zha (1999)
1994 - Applications of VAR models to financial data by Hamilton, Campbell, Lo and
MacKinlay (1997), Cuthbertson (1996), Mills (1999) and Tsay (2001).
2003 Autoregressive conditional heteroskedasticity (ARCH) model by Robert Engle won
Nobel Memorial Prize for Economics
2013- Lars Peter Hansen was awarded the Nobel Memorial Prize in Economics, jointly with
Robert J. Shiller and Eugene Fama

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