When is a variable exogenous

See also: analysis of commonality. Browse Other Glossary Entries. Courses Using This Term. Return to Glossary Search. For example, a mile commute requires more fuel than a mile commute. Other relationships that may be endogenous include:. Advanced Technical Analysis Concepts. Fundamental Analysis. Financial Ratios. Financial Analysis. Technical Analysis Basic Education. Your Privacy Rights. To change or withdraw your consent choices for Investopedia.

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We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Financial Analysis How to Value a Company. What Is an Endogenous Variable? Key Takeaways Endogenous variables are variables in a statistical model that are changed or determined by their relationship with other variables. Endogenous variables are dependent variables, meaning they correlate with other factors—although it can be a positive or negative correlation.

Endogenous variables are important in economic modeling because they show whether a variable causes a particular effect.

Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. In this instance it would be correct to say that infestation is exogenous within the period, but endogenous over time.

Hendry, D. Dynamic Econometrics. Oxford: Oxford University Press. Pearl, Judea. Causality: Models, Reasoning, and Inference. Cambridge: Cambridge University Press. Sage Publications. Exogenous variable see also endogenous variable : A factor in a causal model or causal system whose value is independent from the states of other variables in the system; a factor whose value is determined by factors or variables outside the causal system under study.

For example, rainfall is exogenous to the causal system constituting the process of farming and crop output. There are causal factors that determine the level of rainfall—so rainfall is endogenous to a weather model—but these factors are not themselves part of the causal model we use to explain the level of crop output. As with endogenous variables, the status of the variable is relative to the specification of a particular model and causal relations among the independent variables.

An exogenous variable is by definition one whose value is wholly causally independent from other variables in the system. A variable can be made endogenous by incorporating additional factors and causal relations into the model.

There are causal and statistical interpretations of exogeneity.