1 Software Overview

The following software and programming languages are commonly used for conducting economic analyses:

  1. R: R is a programming language designed for statistical computing and graphics. This language is widely used by data scientists and researchers for a range of tasks such as data processing, visualization, model estimation, and performing predictive or causal inference. For instance, one can use R to import GDP data, plot the data, compute the GDP growth rate from this data, and finally, apply time-series modeling techniques to predict future GDP growth.

  2. LaTeX: LaTeX is a powerful document preparation system widely used for typesetting scientific and technical documents. Similar to Microsoft Word, LaTeX is a text formatting software, but it offers advanced support for mathematical equations, cross-references, bibliographies, and more. LaTeX is particularly useful for creating professional-looking PDF documents with complex mathematical notation.

  3. Markdown: Markdown is designed for simple and easy formatting of plain text documents. It uses plain text characters and a simple syntax to add formatting elements such as headings, lists, emphasis, links, images, and code blocks. Markdown allows for quick and readable content creation without the need for complex formatting options. It is often used for creating documentation, writing blog posts, and formatting text in online forums. Markdown documents can be easily converted to other formats, making it highly portable.

  4. R Markdown: R Markdown combines R with Markdown, LaTeX, and Microsoft Word. This fusion creates an environment where data scientists and researchers can combine text and R code within the same document, eliminating the process of creating graphs in R and then transferring them to a Word or LaTeX document. An R Markdown document can be converted into several formats, including HTML, PDF, or Word. To generate a PDF, R Markdown initially crafts a LaTeX file which it then executes in the background. Thanks to the embedded R code in the R Markdown document, it’s possible to automate data downloading and updating to ensure a financial report remains up-to-date. In fact, the text you’re reading now was crafted with R Markdown.

  5. RStudio: RStudio is an Integrated Development Environment (IDE) for R. An IDE is a software application that combines multiple programs into a single, user-friendly platform. Think of RStudio as the all-in-one tool you’ll use for conducting economic research - it will handle all tasks, running R, Markdown, and LaTeX in the background for you. However, for RStudio to work, R, R Markdown, and a LaTeX processor must be installed on your computer, so that RStudio can use these programs in the background.

  6. R packages: R provides a rich set of basic functions that can be extended with R packages. These packages are a collection of functions written by contributors for specific tasks. For example, the quantmod package provides functions for financial quantitative modeling.

All the software and programming languages mentioned above are open-source, meaning they are freely available and actively developed by a community of contributors. By mastering these tools, you will have the necessary skills to perform data analysis, create reproducible reports, and effectively communicate your findings in the field of economics.