Bickerton, M and Louis Gruneberg, S (2013) The London interbank offered rate (LIBOR) and UK construction industry output 1990-2008. Journal of Financial Management of Property and Construction, 18(3), pp. 268-281. ISSN 1366-4387
Abstract
The aim of this research is to answer whether or not wholesale interest rates, such as the London Interbank Offered Rate (LIBOR), can be used as an effective policy instrument to influence construction output. Developers and contractors borrow to finance construction and are charged retail interest rates, determined by the lending bank. The study investigated the relationship between LIBOR and construction industry output. – The study identified two time series, LIBOR and annual construction output and a number of regressions were run using the first differences to observe whether a change in LIBOR alone had a significant influence on construction output lagged by one to four years. – No significant relationship was found between changes in LIBOR and the annual change in construction output, regardless of the number of years lagged. – The policy implication of this research shows that control of demand for construction by government using wholesale interest rates is unlikely to succeed. Banks' lending to developers depends on other factors, such as retail interest rates, risk management and expectations. – The value of this research is that it supports the view that government policy needs to focus on stimulating construction demand, using real projects rather than monetary policies, such as interest rate manipulation.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | construction business cycle; construction output; interest rates; libor |
| Index terms: | construction output, policy instrument, interest rate, time series, construction industry, policy implication, construction demand, London, government policy, risk management |
| Subjects: | risk assessment, policy studies, data science, economic analysis, operations management, public policy, Geography, industry analysis, market analysis |
| Topics: | Business Strategy, Research Practice, Geographical Context, Project Management, Risk Management, Governance |
| Descriptive scope: | 4 PCTA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here