Handbook Of Econometrics_3

Vectors and matrices played a minor role in the econometric literature published before World War II, but they have become an indispensable tool in the last several decades. Part of this development results from the Vectors and matrices played a minor role in the econometric literature published before World War II, but they have become an indispensable tool in the last several decades. Part of this development results from the importance of matrix tools for the statistical component of econometrics; another reason is the in- creased use of matrix algebra in the economic theory underlying econometric relations. The objective of this chapter is to provide a selective survey of both areas. Elementary properties of matrices and determinants are assumed to be known, including summation, multiplication, inversion, and transposition, but the concepts of linear dependence and orthogonality of vectors and the rank of a matrix are briefly reviewed in Appendix A. Reference is made to Dhrymes (1978), Graybill (1969), or Hadley (1961) for elementary properties not covered in this chapter. more