ABSTRACT
We have already seen that in econometric research, mathematical economics and statistics go hand in hand. For a good understanding of the working methods of econometrics, it is, nevertheless, necessary to distinguish clearly between the functions exercised by each of them. The order of succession in which they are applied is not always the same. “Living” research work constantly adapts itself to the circumstances. The investigation sometimes is like a game of tennis between the economist and the statistician–even if they are one and the same person–or a discussion in which each makes a contribution in turn. In general, the investigation will begin with an economic analysis of the problem. After that, in many cases, a statistical testing of the theory set up concerning the phenomenon under consideration will follow. After the testing, there is often occasion to draw further conclusions with the help of the theory. But it is also possible that the theory has to be revised as a consequence of the testing. The revised theory, then, has to be tested again, before further conclusions can be drawn; the tennis ball goes back and forth twice.
