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Learning Econometrics involves the following steps.
Whatever the book you use for studying Econometrics, you will eventually learn the steps to master this subject goes as below:
1. Study the Problem: You come across a problem, indulge in deep thoughts about its variables, causes etc. and make note of it.
2. Model Formulation: Out of step one, you have gathered some information regarding the cause-effect, variables, and miscellaneous facts. You can use them to formulate an Econometric model of the problem. For example wages of female workers. In this case, you know education, hours of work, maternity leave, social-psychological bias etc may affect the wage level.
3. Estimation of the Model: Now using the model, specified in step 2, you estimate the value of the population parameters. Do not worry about Population Parameter. It’s nothing but the variables you used in the Model.
4. Testing Hypothesis about the phenomenon under study: In this step, you test the hypothesis about the increase in female wage rate due to a recent policy change such as minimum wage rate.
5. Post-estimation diagnostics: You have got the estimates in step 3, tested the hypothesis in step 4. Next step is to see how well your model fits into the real world. Is it reflecting the reality? This is post-estimation diagnostics.