Journal of Forest Economics > Vol 11 > Issue 1

Price transmission between products at different stages of manufacturing in forest industries

Mo Zhou, , Joseph Buongiorno, , jbuongio@wisc.edu
 
Suggested Citation
Mo Zhou and Joseph Buongiorno (2005), "Price transmission between products at different stages of manufacturing in forest industries", Journal of Forest Economics: Vol. 11: No. 1, pp 5-19. http://dx.doi.org/10.1016/j.jfe.2005.02.002

Published: 01 Jun 2005
© 0 2005 Mo Zhou, Joseph Buongiorno
 
Subjects
 
Keywords
JEL Codes:D49L73
PricesStumpageTimberLumberPulpwoodPulpPaperEconometricsCo-integrationCausalityMultiplier
 

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In this article:
Introduction
Data and methods
Results
Summary and conclusion

Abstract

The theory of demand and supply implies a positive relationship, or “price transmission” between the prices of products at different stages of manufacturing. This relationship was investigated with quarterly prices of softwood stumpage in the US South, and national prices of forest products, from 1977 to 2002. All prices, net of inflation, were found to be nonstationary and there was no evidence of co-integration between prices. Vector autogressive models, augmented by Granger causality tests and multiplier analysis showed that there was a one-to-one permanent positive response of the southern sawtimber stumpage price to a permanent change in the national lumber price. There was also a one-third permanent positive response of the national paper price to a permanent change in the national pulp price. There was no relation between regional pulpwood prices and national pulp or paper prices. When price transmission was significant, the full adjustment took about 2 years.

DOI:10.1016/j.jfe.2005.02.002