Nonlinear Regression Functions Ch 8 Introduction to Econometrics by Stock and Watson
Channel: Zahid Asghar
Date: 21/08/2021

• Everything so far has been linear in the X’s
• But the linear approximation is not always a good one
• The multiple regression framework can be extended to handle regression functions that are nonlinear in one or more X.
Outline
1. Nonlinear regression functions – general comments
2. Nonlinear functions of one/more variable: interactions
3. Linear-log, log-linear and elasticities
4. Interpretation, Interaction of variables
5. 7 models which one to choose and why