The causal relationship between construction workload and construction price

Abstract

Based on the Engle-Granger (1987) methodology for cointegration and error correction mechanism models the paper examines causal relationships between the UK construction workload and price. The model tests the intuitive belief that the construction price (tender price index) is a long run determinant of construction workload (new orders) and that the relationship is constantly correcting itself back on to this long run path. The results suggest that there is a relationship between the variables but a very weak one.