Dynamics of private industrial space demand in Singapore

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. In the generalized forecast error variance decomposition analysis, one-standard deviation shocks to the manufacturing GDP (LMGDP) was found to account for an average 67.10% of the variances of the private industrial space demand (LPRD). It was also found that the most volatile impulse responses from the industrial demand variance were inflicted by one-standard error shocks on the ecm and the manufacturing GDP terms.