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Releases: IsadoreNabi/BayesianDisaggregation

BayesianDisaggregation Package

17 Sep 01:18
@IsadoreNabi IsadoreNabi
0.1.0
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Extended Description for BayesianDisaggregation Package

1. Overview

BayesianDisaggregation is an R package that solves a fundamental problem in data analysis: coherently projecting structure from disaggregated spaces onto aggregated data through uncertain intermediaries.

At its core, the package addresses situations where you need to relate information at incompatible levels of granularity, but the only way to do so is through a proxy that isn't completely reliable. The solution incorporates this uncertainty honestly and propagates it through to the final disaggregation.

2. The Problem

You frequently encounter data at different resolutions that need to be related:

  • Variable X: Aggregated data (e.g., Consumer Price Index at city/national level)
  • Variable Y: Disaggregated data (e.g., economic gains by sector)
  • Variable Z: An imperfect proxy for disaggregation (e.g., Gross Value Added by sector)

The challenge: How do you decompose X using the structure from Y when your mapping (Z) is uncertain?

3. The Solution

BayesianDisaggregation implements a principled Bayesian framework that:

  1. Extracts likelihood signal from your prior disaggregation weights via PCA/SVD
  2. Performs Bayesian updating to transform prior weights into posterior weights that incorporate uncertainty
  3. Provides multiple update rules (weighted, multiplicative, Dirichlet, adaptive) for different use cases
  4. Validates results through coherence, stability, and interpretability metrics
  5. Delivers analytical solutions avoiding MCMC computational overhead

4. Key Innovation

This package represents a methodological contribution to econometrics and data science, providing the first analytical solution to the structure transfer problem with uncertain intermediaries.

The package's breakthrough lies in recognizing that PCA on temporally-centered disaggregation weights yields exactly the likelihood signal needed for Bayesian updating. This enables:

  • Formal uncertainty quantification rather than ad-hoc treatment
  • Analytical solutions for tractable sample sizes
  • Transparent propagation of proxy uncertainty to final results

4.1. Summary of related methods and where this package fits

Problem. You often want to compare an aggregate series $X_t$ (e.g., CPI) with a disaggregated series $Y_{t,k}$ across sectors $k$, but only have an imperfect intermediary $Z_{t,k}$ that approximates the cross-sectional structure (e.g., sectoral value added). The conceptual challenge is transferring structure from $Z$ to disaggregate $X$, while honestly accounting for uncertainty in $Z$.

What this package does. The package treats $Z$ as a Bayesian prior over sectoral weights $P_{t,k}$ (rows on the probability simplex), extracts a low-dimensional temporal signal via PCA computed by SVD on the time-centered matrix $Z$, and uses that signal as an analytical likelihood to obtain a closed-form posterior $W_{t,k}$ for the weights. The updated weights then disaggregate $X_t$ into $X_{t,k}=W_{t,k},X_t$. This is entirely MCMC-free and computationally light. Conceptually, it is a structure-transfer method with an uncertain intermediary and an analytical update.

What we did not find in the literature. We did not find a prior, named methodology that (i) takes an uncertain structural intermediary $Z$, (ii) derives a temporal likelihood from PCA/SVD of $Z$, and (iii) performs an analytical Bayesian update to produce posterior disaggregation weights that remain row-stochastic and are used to disaggregate an unrelated aggregate $X_t$. There are adjacent traditions, but each misses at least one of these pieces:

  • Biproportional balancing / RAS / IPF. Classic RAS adjusts a matrix to match new margins by multiplying rows/columns iteratively (Deming & Stephan, 1940, pp. 28–29; overviews referencing Bacharach, 1970). It doesn’t construct a likelihood from PCA/SVD nor deliver a probabilistic posterior on the simplex for use as disaggregation weights. It’s a deterministic reconciliation method for totals, not a Bayesian structure-transfer with an uncertain intermediary.
  • Temporal disaggregation (Denton, Chow–Lin, Fernández). These methods distribute low-frequency aggregates into higher frequency using a related indicator series, via smoothness/BLU estimators (Eurostat, 2013, pp. 79–98; see Denton-type formulations; Chow–Lin and Fernández are discussed there). They do not address cross-sectional disaggregation with simplex-valued weights nor use PCA-derived likelihoods.
  • Forecast reconciliation for hierarchies (e.g., MinT). This reconciles inconsistent forecasts across aggregation trees by projecting onto a coherent subspace (Wickramasuriya et al., 2019, pp. 1–3). It is forecast-centric and linear-algebraic—not a Bayesian update for compositional weights with PCA-likelihoods.
  • Compositional/Bayesian state-space models exist (e.g., Dirichlet evolutions), but we did not find an analytical 1-step update that (a) builds its likelihood from PCA/SVD of $Z$ and (b) outputs posterior weights to disaggregate a different aggregate series $X_t$.

Takeaway. To our knowledge, the package provides a new, analytical approach to the “structure transfer with uncertain intermediary” problem in the specific setting of time-varying, simplex-valued weights: it uses PCA via SVD on $Z$ to define a temporal likelihood, and then performs a closed-form Bayesian update to posterior weights that can immediately disaggregate $X_t$. That makes it distinct from RAS/IPF balancing, from temporal-frequency disaggregation (Denton/Chow–Lin/Fernández), and from hierarchical forecast reconciliation.

4.2. References

Deming, W. E., & Stephan, F. F. (1940). On a least squares adjustment of a sampled frequency table when the expected marginal totals are known. The Annals of Mathematical Statistics, 11(4), 427–444. https://doi.org/10.1214/aoms/1177731829 (see method description on pp. 428–430 for the iterative proportional fitting idea). ([apps.bea.gov][1])

Eurostat. (2013). Handbook on quarterly national accounts (2013 edition). Publications Office of the European Union. (See Chapter “Benchmarking and temporal disaggregation,” esp. the Denton formulation and BLU approaches, pp. 79–98.)

International Labour Organization (ILO), International Monetary Fund (IMF), Organisation for Economic Co-operation and Development (OECD), Eurostat, United Nations Economic Commission for Europe (UNECE), & The World Bank. (2020). Consumer Price Index Manual: Concepts and Methods. IMF. (Aggregation structure and weighting practices are explained throughout; see e.g. Ch. 3 on index number theory and aggregation). ([Scribd][2])

Wickramasuriya, S. L., Athanasopoulos, G., & Hyndman, R. J. (2019). Optimal forecast reconciliation for hierarchical and grouped time series through trace minimization. Statistica Sinica, 30(4), 1555–1586. (Preprint version available as arXiv:1805.07245; see Sections 1–2 for the reconciliation setup.) ([Scribd][3])

4.2.1. Notes on scope and claims

5. Economic Applications

5.1. Disaggregating Consumer Price Index

This package enables analyses that were previously impossible:

  • Which sectors are truly driving inflation? Decompose CPI by economic activity to identify inflation sources
  • How do price shocks differentially affect industries? Understand sector-specific impacts of monetary policy
  • What are the real sectoral price dynamics? Track inflation patterns at the industry level

These are questions policymakers need answered but couldn't address with existing tools. No traditional methods exist for disaggregating CPI by economic sector because the mapping between consumer prices and productive sectors is inherently uncertain.

6. Applications Beyond Economics

The framework generalizes to any domain with the structure transfer problem:

6.1. Neuroscience

Relate global bra...

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