Economists often develop econometric models to test their theories, using statistical methods to analyze data and validate their hypotheses.
Economists formulate theories to explain economic phenomena. To test these theories, they create models, which are simplified representations of real-world situations. These models often involve equations and assumptions. To see if the model aligns with reality, economists collect and analyze relevant data, comparing the model's predictions with actual observations. If the model performs well in explaining and predicting real-world economic behavior, it adds support to the underlying economic theory.
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