Endogenous and Exogenous Variables

Most economic models contain more variables than equations. The model is only able to determine values for as many variables as there are equations. Values for some variables must be set externally (by the user). Such variables are called exogenous. The rest -- whose values are determined by the model -- are called endogenous.

Although the number of endogenous variables is always equal to the number of equations, there may be several ways to pick the endogenous group from among the entire set of variables. A particular choice of exogenous and endogenous variables is called a closure.

URL of this topic: www.copsmodels.com/webhelp/rungtap/hc_endoexo.htm

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