ABSTRACT
This chapter discusses the assumptions and estimation procedure of the general linear model. The utilization of the general linear model in economic forecasting is described, and some economic applications of the general linear model are provided. The chapter examines stochastic specification of the general linear model. It estimates the true coefficients by ordinary least squares (OLS). This coefficient measures the percentage of the total variation in the dependent variable accounted for the independent variables after adjusting the regression model to the number of independent variables. Wilson employed the regression analysis to estimate the cost function of the savings and loan (S&L) associations. Numerous economists utilize the general linear model in testing economic propositions. It is argued that net exports (NE), exports minus imports, are negatively related to labor cost per unit of output (LC). Finally, the chapter presents the production function to show the relationship between input and output.
