A MAXIMUM-LIKELIHOOD COINTEGRATION ANALYSIS OF CANADIAN LUMBER EXPORTS

Johansen's cointegration analysis is used to investigate causal relati onships between Canadian lumber exports, U.S. lumber price, U.S. housi ng starts and the Canada-U.S. exchange rate. The results suggest that there is only one stable equilibrium relationship among these variable s in the long run. Forecast error variance decomposition and impulse r esponses from a vector error-correction model are used to examine the short-run dynamic relationships among the variables. The results sugge st significant dynamic relationship among the variables. The results a lso indicate that the pass-through of exchange rate is incomplete in t he long run and that the effects of exchange rate on lumber exports va ry between the short run and long run.