Exogenous and endogenous variables: Difference between revisions

Revision as of 14:36, 19 October 2021

Revision as of 13:18, 10 March 2022

Line 1:

{{short description|Classification of variables in economic models}}

{{for multi|the term in biology|Endogeny (biology)|the term in econometrics|Endogeneity (econometrics)||Exogeny}}

In an [[economics|economic]] [[model (economics)|model]], an '''exogenous variable''' is one whose valuemeasure is determined outside the model and is imposed on the model, and an '''exogenous change''' is a change in an exogenous variable.<ref name=Mankiw>Mankiw, N. Gregory. ''Macroeconomics'', third edition, 1997.</ref>{{rp|p. 8}}<ref name=Varian>Varian, Hal R., ''Microeconomic Analysis'', third edition, 1992.</ref>{{rp|p. 202}}<ref name=Chiang>Chiang, Alpha C. ''Fundamental Methods of Mathematical Economics'', third edition, 1984.</ref>{{rp|p. 8}}

In contrast, an '''endogenous variable''' is a variable whose valuemeasure is determined by the model. An '''endogenous change''' is a change in an endogenous variable in response to an exogenous change that is imposed upon the model.<ref name=Mankiw/>{{rp|p. 8}}<ref name=Chiang/>{{rp|p. 8}}

The term '''[[endogeneity (econometrics)|endogeneity]]''' in [[econometrics]] has a related but distinct meaning. An endogenous random variable is [[correlation|correlated]] with the [[Errors and residuals|error term]] in the econometric model, while an exogenous variable is not.<ref>{{cite book |first=Jeffrey M. |last=Wooldridge |authorlink=Jeffrey Wooldridge |title=Introductory Econometrics: A Modern Approach |___location=Mason |publisher=South-Western |edition=Fourth |year=2009 |isbn=978-0-324-66054-8 |page=88 |url=https://books.google.com/books?id=64vt5TDBNLwC&pg=PA88 }}</ref>