FOREST SECTOR MODELING - A SYNTHESIS OF ECONOMETRICS, MATHEMATICAL-PROGRAMMING, AND SYSTEM DYNAMICS METHODS

Quantitative analysis and forecasting of forest product markets began in the 1950s, based almost exclusively on pure time-series analysis. S ince then, considerable improvements have been made in the theoretical basis of the models, the statistical methods of estimation, and the c overage of the data. Especially noteworthy is the exploitation of pane l data in the analysis of demand for final products. To model the indu stry supply of intermediate and final products, however, activity anal ysis seems more promising than econometrics. It allows for a detailed description of the techniques of production, and, therefore, a better modeling of technical change than the econometric approach. This paper presents a class of models, currently used for policy analysis and fo recasting, that present a blend of econometric and mathematical progra mming, with a dash of system dynamics. Econometrically estimated deman d and supply functions are combined with activity analysis of producti on and transportation, into optimizers to calculate spatial equilibria in multi-product markets. The shadow prices of the optimization are t hen the key inputs in predicting capacity change by region and process , in system dynamics fashion, and based on Tobin's q theory of investm ents.