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Difference between Economic model and econometric model
1. Difference Between Economic model and Econometric model
2. Economic model is the theoretical construct that represents the complex economic process. Econometric model is the statistical concept that represents the numerical estimate of the variables involved in economic process.
3. Economic model is based on mathematical modeling. Econometric model is based on statistical modeling.
4. Economic model is focused on establishing the logical relationships between the variables in the model. Econometric model is focused on estimating the magnitude and direction of relationship between the variables.
5. Economic model is applied in stating the theoretical relationship into mathematical equations. Econometric model is applied in stating the empirical extent of the economic model.
6. Economic model believes that outcome is certain and exact. So, disturbance term is not required. Econometric model believes that outcome is certain but not exact. So, disturbance term plays the vital role.
7. Economic model is deterministic in nature. Econometric model is stochastic in nature.
8. The Keynesian consumption function: C = a + bY is the economic model. The Keynesian consumption function: C = a + bY + μ is the econometric model.
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