Forecasting construction demand : a vector error correction model with dummy variables

Modelling the level of demand for construction is vital in policy formulation and implementation as the construction industry plays an important role in a country’s economic development process. In construction economics, research efforts on construction demand modelling and forecasting are various, but few researchers have considered the impact of global economy events in construction demand modelling. An advanced multivariate modelling technique, namely the vector error correction (VEC) model with dummy variables, was adopted to predict demand in the Australian construction market. The results of prediction accuracy tests suggest that the general VEC model and the VEC model with dummy variables are both acceptable for forecasting construction economic indicators. However, the VEC model that considers external impacts achieves higher prediction accuracy than the general VEC model. The model estimates indicate that the growth in population, changes in national income, fluctuations in interest rates and changes in householder expenditure all play significant roles when explaining variations in construction demand. The VEC model with disturbances developed can serve as an experimentation using an advanced econometrical method which can be used to analyse the effect of specific events or factors on the construction market growth.

Market effects on forecasting construction prices using vector error correction models

Construction price forecasting is an essential component to facilitate decision-making for construction contractors, investors and related financial institutions. Construction economists are increasingly interested in seeking a more analytical method to forecast construction prices. Although many studies have focused on construction price modelling and forecasting, few have considered the impacts of large-scale economic events and seasonality. In this study, an advanced multivariate modelling technique, namely the vector correction (VEC) model with dummy variables, was employed. The impacts of global economic events and seasonality are factored into the model to forecast the construction price in the Australian construction market. Research findings suggest that both long-run and dynamic short-term causal relationships exist among the price and levels of supply and demand in the construction market. These relationships drive the construction price and supply and demand, which interact with one another as a loop system. The reliability of forecasting models was examined by the mean absolute percentage error (MAPE) and the Theil's inequality coefficient U tests. The test results suggest that the conventional VEC model and the VEC model with dummy variable are both acceptable for forecasting the construction price, while the VEC model considering external impacts achieves higher prediction accuracy than the conventional VEC model. © 2014 © 2014 Taylor & Francis.

A panel vector error correction approach to forecasting demand in regional construction markets

Reliable forecasting as to the level of aggregate demand for construction is of vital importance to developers, builders and policymakers. Previous construction demand forecasting studies mainly focused on temporal estimating using national aggregate data. The construction market can be better represented by a group of interconnected regions or local markets rather than a national aggregate, and yet regional forecasting techniques have rarely been applied. Furthermore, limited research has applied regional variations in construction markets to construction demand modelling and forecasting. A new comprehensive method is used, a panel vector error correction approach, to forecast regional construction demand using Australia’s state-level data. The links between regional construction demand and general economic indicators are investigated by panel cointegration and causality analysis. The empirical results suggest that both long-run and causal links are found between regional construction demand and construction price, state income, population, unemployment rates and interest rates. The panel vector error correction model can provide reliable and robust forecasting with less than 10% of the mean absolute percentage error for a medium-term trend of regional construction demand and outperforms the conventional forecasting models (panel multiple regression and time series multiple regression model). The key macroeconomic factors of construction demand variations across regions in Australia are also presented. The findings and robust econometric techniques used are valuable to construction economists in examining future construction markets at a regional level.

What explains dissent on the High Court of Australia? An empirical assessment using a cointegration and error correction approach

This article examines the factors influencing the annual dissent rate on the High Court of Australia from its first full year of operation in 1904 up to 2001 within a cointegration and error correction framework. We hypothesize that institutional factors, socioeconomic complexity, and leadership style explain variations in the dissent rate on the High Court of Australia over time. The institutional factors that we consider are the Court's caseload, whether it had discretion to select the cases it hears, and whether it was a final court of appeal. To measure socioeconomic complexity we use the divorce rate, urbanization rate, and real GDP per capita. Our main finding is that in the long run and short run, caseload and real income are the main factors influencing dissent. We find that a 1 percent increase in caseload and real income reduce the dissent rate on the High Court of Australia by 0.3 percent and 0.6 percent, respectively, holding other factors constant.

Multilabel classification using error correction codes

This paper presents a multilabel classification method that employs an error correction code together with a base ensemble learner to deal with multilabel data. It explores two different error correction codes: convolutional code and BCH code. A random forest learner is used as its based learner. The performance of the proposed method is evaluated experimentally. The popular multilabel yeast dataset is used for benchmarking. The results are compared against those of several exiting approaches. The proposed method performs well against its counterparts.

A panel error correction approach to explore spatial correlation patterns of the dominant housing market in Australian capital cities

Purpose - A panel error correction model has been developed to investigate the spatial correlation patterns among house prices. This paper aims to identify a dominant housing market in the ripple down process. Design/methodology/approach - Seemingly unrelated regression estimators are adapted to deal with the contemporary correlations and heterogeneity across cities. Impulse response functions are subsequently implemented to simulate the spatial correlation patterns. The newly developed approach is then applied to the Australian capital city house price indices. Findings - The results suggest that Melbourne should be recognised as the dominant housing market. Four levels were classified within the Australian house price interconnections, namely: Melbourne; Adelaide, Canberra, Perth and Sydney; Brisbane and Hobart; and Darwin. Originality/value - This research develops a panel regression framework in addressing the spatial correlation patterns of house prices across cities. The ripple-down process of house price dynamics across cities was explored by capturing both the contemporary correlations and heterogeneity, and by identifying the dominant housing market.

Testing for error correction in panel data

This paper proposes new error correction-based cointegration tests for panel data. The limiting distributions of the tests are derived and critical values provided. Our simulation results suggest that the tests have good small-sample properties with small size distortions and high power relative to other popular residual-based panel cointegration tests. In our empirical application, we present evidence suggesting that international healthcare expenditures and GDP are cointegrated once the possibility of an invalid common factor restriction has been accounted for. © 2007 Blackwell Publishing Ltd.

Error-correction-based cointegration tests for panel data

This article describes a new Stata command called xtwest, which implements the four error-correction-based panel cointegration tests developed by Westerlund (2007). The tests are general enough to allow for a large degree of heterogeneity, both in the long-run cointegrating relationship and in the short-run dynamics, and dependence within as well as across the cross-sectional units.

Error correction testing in panels with common stochastic trends

This paper develops panel data tests for the null hypothesis of no error correction in a model with common stochastic trends. The asymptotic distributions of the new test statistics are derived and simulation results are provided to suggest that they perform well in small samples. Copyright © 2015 John Wiley & Sons, Ltd.

Granger causality among house price and macroeconomic variables in Victoria

This study analyses the dynamic causality of four macroeconomic variables on house prices. The four macroeconomic variables have interrelationships with house prices in certain lagged terms, but these relationships are not always the same as the notions put forward in prior research. The relationships are detected to be unstable in the three observation periods. The instability of these relationships would cause difficulty in predicting house prices in the market, especially for policy makers and market participants.

Does military expenditure determine Fiji's exploding debt levels?

Fiji's total debt stands at 65% of GDP. Domestic debt constitutes 55% of GDP. The goal of this paper is to investigate whether military expenditure has contributed to Fiji's exploding debt levels over the period 1970 to 2005. Our empirical analysis, conducted within a cointegration and vector error-correction framework, suggests that, in the long-run, military expenditure has had a statistically significant positive impact on both external debt and domestic debt, while income has had a statistically significant positive impact on domestic debt and a statistically significant negative impact on external debt. We explain the reasons behind this finding and draw some policy implications.

Crime rates, male youth unemployment and real income in Australia: evidence from Granger causality tests

This article applies Granger causality tests to examine the relationship between seven different categories of property crime and violent crime against the person, male youth unemployment and real male average weekly earnings in Australia from 1964 to 2001 within a cointegration and vector error correction framework. It is found that fraud, homicide and motor vehicle theft are cointegrated with male youth unemployment and real male average weekly earnings. However, there is no evidence of a long-run relationship between either break and enter, robbery, serious assault or stealing with male youth unemployment and real male average weekly earnings.

Convergence among the sub-markets in Australian regional building and construction sector

Studies on market convergence are well considered in the literature. However, the majority of the previous research focused on housing markets and few studies have concentrated on construction markets. Owing to a simultaneously dramatic increase in the construction prices of the sub-markets in the building construction sector in Australia, this paper aims to identify the convergence among these markets, involving house construction market, other-residential building construction market, and non-residential building construction market. To achieve it the Granger causality test and generalized response function depending on the vector error correction model with the quarterly data of Australia’s eight states from 1998 to 2010 will be applied. Based upon the econometric tests, the price diffusion patterns among these construction markets have been identified. Research on the convergences of construction markets not only helps construction firms perform well in business operations and arbitrage activities, but also provides policy makers with useful information for enacting effective construction policies for national perspectives and approaches to infrastructure planning.