**Appendix A**

**BASIC MATRIX ALGEBRA FOR ECONOMETRICS**

**A.1 MATRIX DEFINITIONS**

**A.1.a Definitions**

An *m × n* matrix is a rectangular array of elements arranged in *m* rows and *n* columns. A general layout of a matrix is given by

In this general form, we can easily index any element of the matrix. For instance, the element in the *i*th row and *j*th column is given by *a _{ij}.* It is straightforward to create matrices in Proc IML. For example, the Proc IML command

*A*= {2 4,3 1} will create the 2 × 2 matrix

A row vector of order *n* is a matrix with one row and *n* columns. The general form of a row vector is *y* = [*y*_{1} *y*_{2} … *y _{n}*.] A column vector of order

*m*is a matrix with

*m*rows and one column. The general form of a column vector is

It is straightforward to create row and column vectors in Proc IML. For example, the Proc IML command y = {2 4} will create the row vector *y* = [2 4], while the Proc IML command c={–3, 4} will create the column vector

Of course, these definitions can easily be extended to matrices of any desired dimension and consequently the Proc IML code can be adjusted to accommodate these changes. ...