DO FOREST ASSETS HEDGE INFLATION

Forest assets are commonly viewed as good hedges against inflation. Th e view is based largely, however, on anecdotal evidence rather than em pirical analysis. This paper examines the historical relationship betw een forestry returns and inflation. The results suggest that forests i n the U.S. West and South have been superior hedges against higher-tha n-anticipated inflation; forests in the Northeast have been less effec tive inflation hedges. The results also indicate that western and sout hern forests have been overvalued during periods of relatively high ex pected inflation. Markets for forests in the Northeast, however, have been relatively efficient processors of inflation expectations.