Abstract
The integration of the Nordic timber markets has been analysed to provide market information to various decision-makers, e.g., climate and industrial policies and investment decisions. This study addresses the interlinkage between Nordic (Sweden, Norway and Finland) roundwood markets (Scots pine (Pinus sylvestris L.)) and Norway spruce ((Picea abies L.) sawlogs and pulpwood). In total, eleven markets were analysed using quarterly data over the period 2006Q1–2017Q4 where various unit root and stationary tests were performed together with Johansen’s cointegration test. In addition, directional causality analyses between the integrated markets were also performed. The results show that the law-of-one-price (LOP) hypothesis can be rejected for most of the studied markets and that no individual market emerges as the price-leader. Only the Swedish and Norwegian pine sawlog markets are integrated suggesting a single market for both countries. Price affecting national and forest-related policies as well as investments in the forestry sector, forest industries, bioenergy sector and other forest product using sectors, will not disperse into a larger international market structure; instead, the price effect will be national and more likely have a more profound effect.
Highlights
It can be argued that understanding the transmission of prices between interlinked markets can help us understand competition issues, policy ramifications, arbitrage behaviour and investment patterns
The results show that the law-of-one-price (LOP) hypothesis can be rejected for most of the studied markets and that no individual market emerges as the price-leader
This study focuses on the primary Nordic coniferous regions, i.e., Finland, Sweden and Norway, and on four disaggregated roundwood markets, i.e., pine and spruce sawlogs and pulpwood
Summary
It can be argued that understanding the transmission of prices between interlinked markets can help us understand competition issues, policy ramifications, arbitrage behaviour and investment patterns. In this context, market integration can be described as the comovement of prices and the transmission of price signals across markets. Comovement of prices can help establishing long-run market equilibrium and ensures that integrated markets share the same price information. This provides fundamental information to market actors in their production, investment or trade decisions. If the pulpwood markets are integrated, a price increase in pulpwood in Sweden due to e.g., climate policies would transmit to the other pulpwood markets
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