This study examines stock price reactions, for both U.S. and Canadian
softwood lumber producers, to a series of events culminating in the 19
86 Memorandum of Understanding under which Canada agreed to impose a f
ifteen-percent export tariff on lumber shipped to the U.S. Our results
indicate that a number of these events were accompanied by significan
t reactions in directions consistent with our priors. Notwithstanding
that the events in question pertained principally to the prospects of
a tariff, it is possible that these events also had implications for t
he outcome of free trade negotiations in progress during this time fra
me. JEL classification: 422.