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Office Building Investment and the Macroeconomy: Empirical Evidence, 1973–1985
Author(s) -
Kling John L.,
McCue Thomas E.
Publication year - 1987
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00430
Subject(s) - economics , investment (military) , lag , macroeconomics , interest rate , time lag , distributed lag , monetary economics , microeconomics , econometrics , computer science , computer network , law , politics , political science
Given the recent concern about overbuilding in the office sector, this paper considers the influence that macroeconomic factors have upon office construction. Because office construction is volatile and because the “time to build” problem requires construction to change with a lag, the paper employs a different methodology, vector autoregressions, to model the office building sector. The findings indicate that anticipated output has a large and direct effect. This effect depends on the predictive content of nominal interest rates, suggesting that the declines in nominal rates over the past five years explains the recent overbuilding.