# A Cointegration Analysis of the Nordic Roundwood Markets

^{*}

## Abstract

**:**

## 1. Introduction

#### Previous Research

## 2. Materials and Methods

#### 2.1. The Nordic Roundwood Markets

^{3}) for Finland, Norway and Sweden are presented in Table 1. Sweden is the largest producer of both sawlogs and pulpwood followed by Finland. In comparison, Norway has relatively small production levels. Both Sweden and Finland are, on average, net importers, while Norway is a net exporter of roundwood. These figures tentatively suggest that it is more likely that the Swedish and Finnish markets are integrated, with one of them acting as the price-leader, and that the Norwegian markets behave more independently.

^{3}of both sawlogs and pulpwood, showing a low positive trend. Finland had a production volume around 25 million m

^{3}of both sawlogs and pulpwood in 2018, which is an increase by ten million m3 compared to the trough in 2009. Sweden exhibited the highest production volumes as well as the largest discrepancies between sawlogs and pulpwood. The trends were relatively stable over time with a production volume of pulpwood similar to that of Finland (25 million m

^{3}) and around 35 million m

^{3}sawlogs.

^{3}). No data are available for pine pulpwood in Sweden. Compared to the pulpwood prices, sawlogs started the time-period with a higher volatility and with a larger price difference between the countries. A high volatility could be an indicator for poorly integrated markets. Furthermore, the price development illustrated in Figure 2 suggests that all countries were affected by common external drivers, especially after 2011. This is most clear for the price development of pine pulpwood where the three countries seemed to exhibit the same pattern. Tentatively, this suggests some kind of relationship, or linkage, between the markets. Prices that are nonstationary tend to have persistent shocks without a well-defined mean or variance, i.e., they will not return to their previous long-term trend after being exposed to an external shock. Instead, the price is prone to drift randomly in various directions [2].

#### 2.2. Econometric Framework

#### 2.3. Data

## 3. Results

## 4. Discussion

## 5. Conclusions

## Author Contributions

## Funding

## Acknowledgments

## Conflicts of Interest

## Appendix A

Pine Sawlogs | Spruce Sawlogs | Pine Pulpwood | Spruce Pulpwood | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|

Sweden | |||||||||||

No trend | |||||||||||

Lags | 1 | 1 | 4 | ||||||||

ADG | −2.8185 | −2.2557 | −2.3521 | ||||||||

KPSS | 0.31372 | 0.21901 | 0.26432 | ||||||||

PP | −2.8117 | −2.4184 | −2.0410 | ||||||||

Trend | |||||||||||

ADG | −2.7996 | −2.5772 | −2.1566 | ||||||||

KPSS | 0.14221 | 0.15582 | ** | 0.19318 | ** | ||||||

PP | −2.6710 | −2.5388 | −2.0284 | ||||||||

Norway | |||||||||||

No trend | |||||||||||

Lags | 1 | 1 | 1 | 1 | |||||||

ADG | −4.8432 | ** | −5.1796 | ** | −1.3220 | −1.3519 | |||||

KPSS | 0.90247 | ** | 0.38738 | 0.88562 | ** | 1.19340 | ** | ||||

PP | −2.3786 | −2.2721 | −1.0390 | −0.9638 | |||||||

Trend | |||||||||||

ADG | −4.5909 | ** | −5.0369 | ** | −2.2899 | −2.3265 | |||||

KPSS | 0.41095 | ** | 0.06153 | 0.42768 | ** | 0.37991 | ** | ||||

PP | −2.2677 | −2.4876 | −1.7145 | −1.7477 | |||||||

Finland | |||||||||||

No trend | |||||||||||

Lags | 4 | 4 | 1 | 1 | |||||||

ADG | −6.0257 | ** | −6.7944 | ** | −4.4069 | ** | −2.8834 | ||||

KPSS | 0.09307 | 0.09442 | 0.13621 | 0.67646 | ** | ||||||

PP | −3.0480 | ** | −2.8219 | ** | −2.5138 | −1.9350 | |||||

Trend | |||||||||||

ADG | −6.5566 | ** | −7.4716 | ** | −4.8761 | ** | −2.9362 | ||||

KPSS | 0.04373 | 0.04219 | 0.07135 | 0.09277 | |||||||

PP | −2.9064 | −2.7838 | −2.7785 | −2.3440 |

Pine Sawlogs | Spruce Sawlogs | Pine Pulpwood | Spruce Pulpwood | ||||||
---|---|---|---|---|---|---|---|---|---|

Sweden | |||||||||

No trend | |||||||||

Lags | 1 | 3 | |||||||

ADG | −3.0137 | ** | −4.9673 | ** | |||||

KPSS | 0.13328 | 0.06635 | |||||||

PP | −4.3871 | ** | −5.6472 | ** | |||||

Trend | |||||||||

ADG | −3.3064 | −5.4099 | ** | ||||||

KPSS | 0.10039 | 0.04781 | |||||||

PP | −4.3628 | −5.6054 | ** | ||||||

Norway | |||||||||

No trend | |||||||||

Lags | 1 | 1 | |||||||

ADG | −4.7611 | ** | −3.2384 | ** | |||||

KPSS | 0.11100 | 0.16513 | |||||||

PP | −6.7408 | −4.5304 | ** | ||||||

Trend | |||||||||

ADG | −5.0700 | ** | −3.1749 | ||||||

KPSS | 0.02986 | 0.08637 | |||||||

PP | −6.7917 | ** | −4.5271 | ** | |||||

Finland | |||||||||

No trend | |||||||||

Lags | 1 | ||||||||

ADG | −3.6960 | ** | |||||||

KPSS | 0.07368 | ||||||||

PP | −4.5134 | ** | |||||||

Trend | |||||||||

ADG | −3.7508 | ** | |||||||

KPSS | 0.06948 | ||||||||

PP | −4.4868 | ** |

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**Figure 1.**Production volumes of pulpwood and sawlogs in Norway, Finland and Sweden, 2006–2018 (million m

^{3}) Sources: [15].

**Figure 3.**Logarithmic prices in Finland, Sweden and Norway between 2006 and 2018 for (

**a**) pine sawlogs, (

**b**) spruce sawlogs, (

**c**) spruce pulpwood and (

**d**) pine pulpwood.

Production Sawlogs | Production Pulpwood | Import Roundwood | Export Roundwood | |
---|---|---|---|---|

Finland | 20.62 | 20.53 | 2.80 | 0.71 |

Norway | 4.70 | 4.08 | 0.94 | 2.04 |

Sweden | 34.36 | 26.87 | 4.07 | 1.32 |

Maximum Eigenvalue Test | Trace Test | |||||
---|---|---|---|---|---|---|

Pine sawlogs | ${H}_{0}$ | ${H}_{a}$ | Statistics | ${H}_{0}$ | ${H}_{a}$ | Statistics |

Sweden–Norway | $r=0$ | $r=1$ | 14.48 * | $r=0$ | $r\ge 1$ | 20.13 * |

$\left(k=1\right)$ | $r\le 1$ | $r=2$ | 5.66 | $r\le 0$ | $r=2$ | 5.66 |

Spruce pulpwood | ${H}_{0}$ | ${H}_{a}$ | Statistics | ${H}_{0}$ | ${H}_{a}$ | Statistics |

Sweden–Norway–Finland | $r=0$ | $r=1$ | 8.93 | $r=0$ | $r\ge 1$ | 12.73 |

$\left(k=1\right)$ | $r\le 1$ | $r=2$ | 2.53 | $r\le 1$ | $r\ge 2$ | 3.80 |

$r\le 2$ | $r=3$ | 1.27 | $r\le 2$ | $r=3$ | 1.27 | |

Sweden–Norway | $r=0$ | $r=1$ | 4.62 | $r=0$ | $r\ge 1$ | 5.97 |

$\left(k=1\right)$ | $r\le 1$ | $r=2$ | 1.35 | $r\le 0$ | $r=2$ | 1.35 |

Sweden–Finland | $r=0$ | $r=1$ | 13.4 | $r=0$ | $r\ge 1$ | 15.5 |

$\left(k=2\right)$. | $r\le 1$ | $r=2$ | 2.11 | $r\le 0$ | $r=2$ | 2.11 |

Finland–Norway | $r=0$ | $r=1$ | 8.02 | $r=0$ | $r\ge 1$ | 9.60 |

$\left(k=2\right)$ | $r\le 1$ | $r=2$ | 1.58 | $r\le 0$ | $r=2$ | 1.58 |

Directionality | F-Stat | p-Value |
---|---|---|

Sweden $\u27f6$Norway | 1.41 | 0.24 |

Norway $\u27f6$Sweden | 0.92 | 0.34 |

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Eriksson, V.; Lundmark, R.
A Cointegration Analysis of the Nordic Roundwood Markets. *Forests* **2020**, *11*, 1007.
https://doi.org/10.3390/f11091007

**AMA Style**

Eriksson V, Lundmark R.
A Cointegration Analysis of the Nordic Roundwood Markets. *Forests*. 2020; 11(9):1007.
https://doi.org/10.3390/f11091007

**Chicago/Turabian Style**

Eriksson, Victoria, and Robert Lundmark.
2020. "A Cointegration Analysis of the Nordic Roundwood Markets" *Forests* 11, no. 9: 1007.
https://doi.org/10.3390/f11091007