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| Dynamics of Private Industrial Space Demand in Singapore Author: Tien Foo Sing Start Page: 301 Abstract:
This
study empirically examines the dynamics of the private industrial market
in Singapore using a Vector Error Correction Model (VECM), which is
derived based on the theoretical framework of an extended accelerator
investment model. The GDP in manufacturing sector (LMGDP) and the
composite leading indicator (LCLI) were two unrestricted long-run forcing
variables included in the VECM for the industrial space demand, together
with a pre-determined error correction mechanism (ecm) and other
determinants. The results of the VECM estimation showed negative effects
of the changes in the manufacturing GDP (LMGDP) at different lags on the
private industrial demand (LPRD). Three possible reasons are hypothesized
for the negative manufacturing outputs and industrial space demand
relationship. First, firms substitute space for other factors of
production when the demand for their output increases. Second, firms take
up more space than that required for the existing scale of production and
the excess space can be converted to meet the production needs for the
short-term surge in the outputs. A possible switch of demand from the
private to the public industrial markets during a period of strong output
growth may be the third contributory factor.
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