Determining the Impact of Economic Factors on Local Government Growth Policy: Using Time-series Analysis and Transfer Function Models

Abstract

Being able to predict building activity is important to public administrators and planners. It has been widely established that there is a significant relationship between economic/ financial factors and local government growth policy as measured by building activity. This paper describes and analyses this relationship through the use of time-series methodology. Monthly data for input variables (unemployment rate and prime interest rate) are related to output variables (the monthly issuance of single-family building permits, commercial and industrial permits, total permits, and the estimated construction cost per single-family permit) using time-series intervention and transfer function analysis. Through the use of transfer functions, residential permit decisions, commercial and industrial permit activity and total permits issued for all uses are causally related to levels of unemployment and the prime rate with varying periods of delay before impact is felt in growth policy decisions.