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What is the difference between predetermined and exogenous variables?
Wiki User
∙ 11y ago
The basic difference is that exogeneous variables are fully determined outside the system, but predetermined variables are not. Think of an equation where you have some lagged variables that are independent of subsequent error terms (e.g.consumption in the current period depends on some functional that includes the consumption of the previous period). We could say that the lagged variable was already determined in the period before. Asymptotically predetermined variables can be treated as exogeneous.
Wiki User
∙ 11y ago
Predetermined variables are determined by factors in the past and cannot be changed, while exogenous variables are determined by factors outside the model being analyzed. Predetermined variables are considered to be endogenous in the context of a model, while exogenous variables are considered to be exogenous.
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