Price integration for domestic and imported sawlogs and pulpwood in Finland: an update

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Abstract

This paper provides an analysis on the integration of prices for imported coniferous pulpwood and sawlogs, and respective domestic stumpage prices in the Finnish wood market. Eight real price series were investigated during 2002-2014 using monthly observations. The bounds testing approach by Pesaran et al. [(2001) Bounds testing approaches to the analysis of level relationships. J Appl Econom. 16: 289-326. doi:10.1002/jae.616], indicates there are long-run relationships between prices of domestic and imported wood. For more detailed information, the vector error correction model (VECM) approach was used. Estimation of a system with all eight prices with interpretable results did not succeed; therefore, we estimated models for prices of sawlogs and for pulpwood separately. For sawlogs, two co-integrating vectors, one for pine and one for spruce, were found. For pulpwood prices, one co-integrating vector was identified. The estimated VECMs confirm the results of bounds testing approach, suggesting that causation in the Finnish wood market runs from domestic prices to prices of imported wood. We conclude that prices of domestic and imported coniferous logs and pulpwood are closely connected. The question of full integration remains open, as border prices and stumpage prices by definition differ, at least, by logging and transportation costs.
Original languageEnglish
JournalScandinavian Journal of Forest Research
Volume33
Issue number1
Pages (from-to)71-80
Number of pages10
ISSN0282-7581
DOIs
Publication statusPublished - 2018
MoE publication typeA1 Journal article-refereed

Fields of Science

  • 4112 Forestry
  • Wood prices
  • cointegration
  • import
  • export
  • customs
  • bounds testing
  • TIME-SERIES
  • UNIT-ROOT
  • TIMBER MARKET
  • COINTEGRATION
  • DYNAMICS
  • LAW
  • ESTIMATOR
  • CHINA
  • TESTS

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