Roundwood Market Integration in Finland: A Multivariate Cointegration Analysis

Roundwood market integration in Finland is analysed by four wood assortments and four regions both in the short- and long-run. Using Johansen’s multivariate cointegration tests and monthly stumpage prices for 1985–96, tests indicated full long-run market integration only in the case of pine sawlogs. Causation between regional wood prices mainly originated in the largest wood-using regions of eastern Finland with respect to pine sawlogs and spruce pulpwood, and from the southern Finland with respect to pine and spruce pulpwood markets. Results from the dynamic error-correction models indicate significant departures from the conditions for short-run market integration. The structural break in the market environment caused by the end of central price recommendations was found to have no significant effect on the short-run models.