Economic Statistics

Economic statistics is composed of two interrelated fields, those related to data collection and those to data analysis. In fact, economic statistics is differentiated from other fields of applied statistics due to its unique data collection methods, and because of the scope/scale of analysis.

Most economic data is collected by governmental or large-scale pseudogovernmental agencies. These include the United Nations, the World Bank, and International Monetary Fund (IMF), and the various regional development banks. These are often compilations of data provided by the various countries' central banks. By its nature, macrolevel data is nearly impossible for individual researchers to collect. However, the governmental provision of economic data is increasingly extended to microeconomic data. In the United States, for example, the most comprehensive individual, or microlevel, data is compiled by the Census Bureau and the Bureau of Labor Statistics.

Economic statistics have traditionally been centered upon directly measurable concepts, or to concepts [Page 564]that are potentially well defined. For example, there is less ambiguity in the definition or proper measurement of “income” than there is in defining the concept of “happiness.” For this reason, the statistical problems implied by large measurement errors require less attention in economics than in fields such as marketing or psychology.

Many economic phenomena can be measured in different ways; in fact, they are often defined in different ways as well. Some countries, for example, compute the inflation rate by adjusting each good's price by a quality improvement factor; others do not. For this reason, several agencies and companies have specialized in producing datasets that are internationally comparable. These include the Penn World Tables, the International Financial Statistics database compiled by the IMF, much of the data reported by the Organisation for Economic Co-operation and Development, and several databases compiled by the United Nations.

Methods

Econometrics is the application of statistical techniques to the analysis of economic data and their interrelationships. Physical scientists, and some social scientists, can often rely upon carefully crafted, controlled experiments with which to collect data and test competing theories. Because large-scale controlled experiments are not feasible on a national level, econometrics required a unique set of tools.

In earlier statistical research using the regression methodology, the role of regression was to estimate the correlation between an exogenous variable X on an endogenous variable Y, while holding the other exogenous variables constant. This is accomplished in a statistical sense, since controlled experiments are rare in economics. This is done simultaneously for many endogenous variables within a single equation: Y is a function of Xs.

The concept of General Equilibrium, however, required that the economic variables of interest are jointly determined. That is, X causes Y, but Y also causes X. This phenomenon is often termed the “endogeneity problem.” Since all economic data in the United States, for example, are determined within the same national economy, the analysis is significantly complicated. Such endogeneity is, in fact, the cornerstone of economics, as embodied in the Supply and Demand graphs, a system of two, not one, equations. Market prices and quantities are determined by the interaction (indeed, intersection) of supply and demand. Thus, one cannot hold price constant in order to isolate the effects of X on quantity.

...