What is my unit of observation for this time series data set?

Question

My professor gave us a data set to run a regression and I have a data set which lists years from 1959-2007, gross private investments (in billions of dollars), and gross private savings (in billions of dollars). Each year has a value in billions of dollars. My professor says to not include the unit of observation in our regression.

What is my unit of observation? Is it years? Billions of dollars? Something else?

Answer 1

In econometrics you typically have three different types of data sets.

(1.) Time Series

(2.) Cross-Section

(3.) Panel

What differentiates these three types is the unit of observation used.

Time series, as the name implies, major unit is time (years, months, or even seconds if you are using financial data).

Cross-section, is the objects observed. In microeconomics this may be people or businesses, in macroeconomics countries.

Panel, uses both time series and cross-section. Combining the two together gives a pair, (individual, time) that acts as the unit of observation.

You are using time series data, thus a unit of time would be your unit of observation. In this case you got years.

Sometimes you may desire to include your unit of observation. This may be due to reasons such as trends or individual differences. In the end it depends on the underlying model and specification strategy.