Structural Econometrics

Structural econometrics is a method used by economists to understand how different factors influence economic outcomes by building models based on underlying economic theories. Rather than just observing data patterns, it involves creating detailed models that incorporate assumptions about how reality works—like how consumers decide what to buy or how firms set prices. These models are then tested and calibrated using real-world data to ensure they accurately reflect actual behavior. This approach helps economists predict the effects of policy changes or economic shocks more reliably by understanding the fundamental relationships within the economy.