Saturday, August 18, 2007

The analysis so far....

Since my last meeting with Dr. Poon which was held on Wednesday August 15 a have been faced with a few hurdles. Firstly, Data Poon has provided me with a Data set from 1981-2002 that is already deflated and expressed in constant year 2000 dollars. The reason for this new data set to be used in analysis is that we have not been able to attain the present deflators used by the ABS for Industry Value. Consequently I will be using this new data set for my initial analysis.

I have also realised that I had slightly misinterpreted the methodology for calculating the AES. Whilst originally i was under the impression that I will need to calculate each AES for each data point for some reason (which i can't recall) I changed this interpretation to calculate the AES for each industry only. Hence, I was substituting in industry averages the AES formula (see previous post) as opposed to the values for each data point. Fortunately, this was realised quite early on and given that I have a more reliable data set I have not wasted too much time.

In my previous post I mentioned that I will be using a combination of R, Excel and Maxima to calculate the various AES's. I have now revised this to using Maxima to only simplify the differential equations to be used in the bordered Hessian matrix and use R solely for my regression analysis and AES calculations. My earlier post mentioned that R had a function via the micEcon package that calculates the bordered Hessian matrix. However since my translog model takes into account time and industry effects I will most likely need to write my own function. This should not pose too difficult though the somewhat low level nature of R can be quite frustrating especially when you are used to writing code in high-level OO languages. One of the most frustrating aspects of R is that not only does it not have inbuilt functions to determine the minor or cofactor matrix but there are no nice matrix operation like in Matlab where you can easily element rows and columns of a matrix to create a new matrix. After a few hours of searching I had to accept the fact that i needed to write my own cofactor function as well as copy the elements from the matrix whose cofactor we wish to determine element by element to create the matrix minor to be used in cofactor calculations. The function that I have written can be viewed below:

At present I am very busy with my analysis and completing my partial treatise draft and my next post will be later on next week after my meeting next Friday with Dr. Poon.

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