Essays on US Forest Products Markets

Abstract

International trade of forest products plays a critical role in the economy of many countries around the world. Knowledge of market curves elasticities and the effect of currency exchange rates on goods trade are instrumental for gains, losses, and effective trade policies. Government cost-share programs have become important environmental policies around the world to reduce environmental degradation. This dissertation consists of three separate chapters on U.S. import of softwood plywood, the effect of exchange rate on U.S.-Brazil softwood plywood market, and the effect of the Conservation Reserve Program on U.S. timber market. In the first chapter, we estimate U.S. import demand functions for softwood plywood from Brazil, Canada, Chile, and China using a cointegration approach. Both short run and long run U.S. import demand elasticities for softwood plywood under the evidence of cointegration are estimated. The results suggest that in the long-run, U.S. import demand for softwood plywood is more sensitive to own price change. The second chapter investigates the effect of U.S. dollar’s strengthening with respect to Brazil real on U.S.-Brazil softwood plywood market. An equilibrium displacement modelling approach is used. The price and quantity effects of U.S. dollar’s strengthening is estimated using both a deterministic and stochastic approach. The results both in the short-run and long-run show that the pass-through effect of U.S. dollar’s appreciation is more perceptible to U.S. consumers when U.S. faces a relatively elastic export supply curve from Brazil. Conversely, the absorption effect of U.S. dollar’s strengthening is more perceptible to Brazilian producers when U.S. faces a relatively inelastic export supply curve from Brazil. Overall, the results show that U.S. dollar’s strengthening with respect to Brazilian real during the period 2010-19 had a net positive welfare effect on U.S.-Brazil softwood plywood market. The third chapter investigates the effect of the Conservation Reserve Program (CRP) on the equilibrium prices of standing timber in the U.S. South. For this purpose, a reduced form model for stumpage price is developed and estimated using data from 1960 to 2019. The time series econometrics that includes the tests of stationarity, the cointegration analysis and the linear model with stationary time series variables was used. The results of the estimated model suggest that CRP induced a significant increase in the supply of standing timber that depressed its equilibrium price after 24 years.