ABSTRACT
The term linear in regression analysis means not a linear relationship between the variables, but a model in which the parameters enter in a linear way. However, in many cases, linear relationships are not adequate for economic applications i.e., sometimes economic theory and/or data will not suggest that, there is a linear relationship between variables and moreover, Classical Linear Regression Model requires linearity of parameters only and variables may or may not enter linearly in the model. This chapter deals with different functional forms of linear regression model that can incorporate non-linearity in variables by appropriately re-defining the dependent and independent variables. Many non-linear models can be made linear by appropriate transformations.
