Understanding correlation and causation is essential in econometrics from "summary" of Introduction to Econometrics by Christopher Dougherty
Understanding correlation and causation is a fundamental aspect of econometrics. Correlation refers to the relationship between two variables, where changes in one variable are associated with changes in another. Causation, on the other hand, implies that changes in one variable directly cause changes in another. In econometrics, it is crucial to distinguish between correlation and causation because a correlation between two variables does not necessarily imply a causal relationship. For example, there may be a strong correlation between ice cream sales and sunglasses sales, but it would be incorrect to conclude that buying ice cream causes people to buy sunglasses or vice versa.
To establish causation, econometricians us...
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