A COINTEGRATION ANALYSIS OF CANADIAN WOOD PULP PRICES

The effects of the Canada-U.S. exchange rate, the U.S. pulp price, and the domestic use of pulp on the Canadian pulp price are investigated using a cointegration analysis. Results suggest that the U.S. pulp pri ce is more important than other variables in determining the price of pulp in Canada. The incomplete pass-through of the exchange rate indic ates that Canadian pulp producers may not have market power to increas e their price of pulp. The temporary increase in the price of Canadian pulp in response to a devaluation of the Canadian dollar may be due t o short-term contracts which Canadian pulp producers have with their i mporters.