CAUSALITY, IDENTIFICATION AND RENTAL GROWTH FORECASTS IN THE UK'S REGIONAL OFFICE MARKETS
||CAUSALITY, IDENTIFICATION AND RENTAL GROWTH FORECASTS IN THE UK'S REGIONAL OFFICE MARKETS
||Book of Abstracts: 15th Annual European Real Estate Society Conference in Kraków, Poland
||This paper provides a discussion of the developments in econometric modelling in rental growth forecasts. We use data from the UK's regional office markets. Our aims are first to provide an overall review of office property forecasting literature. We outline the distortion effects and potential causality problems that popular forecasting models are facing. That is, the current rent level may drive, rather than be driven by, supply force. To check out this hypothesis, Granger causality test will be applied. As our results will show, it is important to identify the rent-supply causal direction. To solve out the problem of endogeneity of supply, instrumental variable method will be used, which is followed by statistical tests for the validity and relevance of the instrument.
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