Econometric theory is a branch of economics that uses statistical methods to analyze economic data. It aims to quantify relationships between economic variables, allowing researchers to test hypotheses and forecast future trends. By applying mathematical models, econometricians can better understand how factors like inflation, unemployment, and interest rates interact. The foundation of econometric theory includes concepts such as regression analysis and time series analysis. These tools help economists make sense of complex data sets, providing insights that can inform policy decisions and business strategies. Ultimately, econometric theory bridges the gap between economic theory and real-world data.