A. Toppinen, INCORPORATING COINTEGRATION RELATIONS IN A SHORT-RUN MODEL OF THE FINNISH SAWLOG MARKET, Canadian journal of forest research, 28(2), 1998, pp. 291-298
This paper reports on the results of a simultaneous equations sawlog m
arket model using monthly data for Finland in 1985-1997. Johansen's mu
ltivariate method is used to estimate cointegration vectors, which are
then included in a dynamic error-correction model. Rank tests indicat
e two cointegrating vectors, which is theoretically consistent with th
e demand and supply equations. In the sawlog demand, the equilibrium i
s established for sawlog stumpage price and quantity and sawn wood pri
ce and capital stock, while the supply function in a perfect capital m
arket entails sawlog price and quantity, real interest rate, and the e
ffect of increasing timber stock as captured by a Linear trend. Contra
ry to earlier findings, stumpage price seems to have a positive effect
on sawlog supply, both in the short and long run, while only the long
-run price effect is present in the sawlog demand. Disequilibrium in d
emand is corrected within one quarter, while the speed of adjustment i
s found to be slow in the sawlog supply.