Econometrics is the application of statistical and mathematical methods to economic data in order to test economic theories and estimate relationships between economic variables. The methodology of econometrics involves stating an economic theory or hypothesis, specifying the theory mathematically and as an econometric model, obtaining data, estimating the model, testing hypotheses, making forecasts, and using the model for policy purposes. Regression analysis is a key tool in econometrics that relates a dependent variable to one or more independent variables, with an error term included to account for the inexact nature of economic relationships.