There are two branches of econometrics: **theoretical econometrics** and **applied econometrics**.

The former is concerned with methods, both their properties and developing new ones. It is closely related to mathematical statistics, and it states assumptions of a particular method, its properties. It is particularly important to know when they are not fulfilled.

Applied econometrics does what it says: it applies econometric theory to branches within economics, such as unemployment figures, portfolio theory, demand and supply functions, et.c.

- Gujarati, D.N. (2003).
*Basic Econometrics, International Edition - 4th ed.*. McGraw-Hill Higher Education. pp. 12. ISBN 0-07-112342-3.