In Econometrics,What is a non parametric method versus parametric?

Question

What is the difference between the former and latter? Many Thanks

Answer 1

Parametric methods evaluate relationships between one dependent variable and one or more independent variables. Non-parametric methods evaluate relationships between the values of several variables at time T and the values of the same variables at prior times T-1, T-2, etc.; there is no separtation of variables into dependent and independent.

Answer 2

Parametric has many meanings, most importantly that a parametric method is used when more than one answer is possible or desireable (for instance in a system without beginning values).

Since econometrics is empirical, it is unlikely you wouldn't have a baseline. However, parametric methods will apply when you are talking only about a relationship, and not necessarily about the time series associated to that relationship.

Answer 3

Parametric tests attempt to identify the influence of one variable (X) on another (Y) as cause. An example would be ordinary least squares regression. A non-parametric test simply looks for variance across populations (e.g. Analysis of Variance).