# using examples from economic l

using examples from economic literature briefly explain how thefollowing econometric models are applied in empirical work. Justifywhy each model is suitable for the selected area.

a) probit model

b) Logit model

c) cross section model

d) time series model

Answer:

Answer (a) : Probit model is an econometric model of empiricalstudy which focuses on the regressive nature of the variable whichis dependent and explains that there can be only two outcomes thatthe variable can take up or assume. The outcome will be in the twoextremes of the regression. This model is suitable where thestatistical data concurring to two extremes of a data. For example,if we want to calculate a statistical data where against aparticular field, we have the option to select whether anindividual is dead or alive. Here, an individual can either be deador alive. Here, no other value for this field can be regressed.Therefore , in such situations, Probit model is the most suitablyapplied theory.

Answer (b) : Logit model or Logistic model is anothereconometric model of empirical study which focuses on the binarybase of two values 0 and 1 to be the concentric fixture of aregression analysis. Here, the outcome will be in the two of thevalues, i.e. both the values 0 or 1 can take up the regressionfactor probe and fix the variable. This model is suitable where thestatistical data concurring to two values of a data are coincidingand we the regression is to be done on the basis of two figures

Answer (c) : Cross Selection model is such a unique and wideused econometric model of empirical study which focuses on theregressive nature of the variable which from a particular period oftime and gives data referring to the time period that they referto. Here, the outcome of the regression model exemplifies the datapertaining to the period in which the data has been recorded andhelps the overall regression study. This model is suitable wherethe statistical data concurring to older period of time is to beused in a recent study and the data must be authentic andregressive. For example, if we want to calculate a statistical datawhere against a particular field, we need to know if an individualpertained to particular category, then the cross-section modelprovides the necessary date pertaining to the time period.

Answer (d) : Time series model is the most used and authenticeconometric model of empirical study which takes in toconsideration the existing data available and forecasts thepredictive value of a data so that it can be used in to regressionmodels to calculate may future outcomes and future values for othereconomic policies and outcomes. Here, the outcome of the timeseries regression model exemplifies the data pertaining to futureuse and data prediction of the empirical study. This model issuitable where the statistical data concurring to future use isrequired. For example, if we want to calculate the effect of anyeconomic policy or a financial decision taken by the Government,the time series model provides immense help and authenticity in thecorrect estimation of the values that the statistical model isapplied to figure out.