Endogenous Variable

DEFINITION of 'Endogenous Variable'

A classification of a variable generated by a statistical model that is explained by the relationships between functions within the model. For example, the equilibrium price of a good in a supply and demand model is endogenous because it is set by a producer in response to consumer demand.
It is the opposite of an exogenous variable.

BREAKING DOWN 'Endogenous Variable'

Endogenous variables are important in econometrics and economic modeling because they show whether a variable causes a particular effect. Economists employ causal modeling to explain outcomes (dependent variables) based on a variety of factors (independent variables), and to determine to which extent a result can be attributed to an endogenous or exogenous cause.

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