Endogenous variables

General DSGE Modeling
1

@jpfeifer I have a conceptual question. When we refer to a variable as endogenous variable in a dsge model, does it have to be either a control variable or a state variable with respect to which we optimise. For example we have output which is expressed as a function of capital and labor. We never optimise wrt output but output is an endogenous variable in the model.

Best
Steve

3

Anything that needs to be solved with the rest of the model is an endogenous variable, even if it’s not something that you optimize directly, An example are competitive factor prices. They need to clear the markets, but are not chosen.
Exogenous variables are the ones where you know the values or the process in advance, e.g. TFP in the RBC model.

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