Abstract:
This study utilizes the Timber Assessment Market Model (TAMM) to examine the
differences in Canadian softwood lumber market forecasts arising from econometric
versus activity analysis supply curves. A restricted profit function approach is applied to
three lumber producing regions using the most recent data available on costs, prices, and
output to estimate the econometric supply curve along with factor demands. The
corresponding own- and cross-price elasticities along with the elasticities of substitution
are estimated and compared to past studies. An activity analysis supply curve is
presented utilizing two production technologies. Market forecasts for the period 1996-
2005 are estimated via the TAMM model. A comparison of TAMM solutions for a base
case and three exogenous shock scenarios is presented. Similar price and quantity values
are obtained in the historic period, while the activity analysis provide a much more
volatile reaction to exogenous stimuli.
