The effects of a demand shock upon the market prices of the exported paper and pulp

A matter of common knowledge is that the fluctuations of market prices of forest industry products are rather large. One possible cause for these fluctuations is changes in demand circumstances. It is interesting to know how the market prices act in the case of demand shock, whether a positive demand shock really rise the prices or not. This paper concentrates empirically on the country-level (Finland, Sweden and Canada) annual market prices of some exported forest industry products (newsprint, printing and writing paper and pulp for paper). A change in the growth rate of OECD income was supposed to be as if a demand shock. The empirical method, used in this paper, was an impulse response function. According to these functions, all studied export prices of newsprint, printing and writing paper and pulp for paper were changing procyclically. The smallest effects were in the case of pulp for paper. There were some differences between countries: for Canada these effects were smaller than for Finland or for Sweden excluding pulp for paper, in which there were no remarkable differences between countries.