A System for Short Term Forecasting of the Finnish Forest Sector
Hetemäki, Lauri, Hänninen, Riitta and Anne Toppinen. 2001.
Metsäntutkimuslaitoksen tiedonantoja 805 - Finnish Forest Research
Institute, Research Papers 805. - 64p. + appendices
This paper explains the framework for the System of Short Term Forecasting of the Finnish Forest Sector (MESU) using a case study. The MESU system is a tool used by the Finnish Forest Research Institute in making forecasts for the Finnish Forest Sector Economic Outlook (an annual publication). The use of the MESU system enables assessments in which the development of Finnish forest products export markets and the adjustments of Finnish roundwood markets are analyzed consistently. It is a hierarchical, derived-demand-led system consisting of three parts (models). First, the import demand for forest products in the major export countries/regions is forecasted. In the second stage, these forecasts are inserted as exogenous information in the next stage, the export market model, which determines the Finnish forest products exports. In the third stage, the forecasts from the export market models are, in turn, inserted in to the roundwood market model, which determines the forecasts for roundwood demand. The paper demonstrates the MESU system by analyzing how short-term changes in the sawnwood import demand in Germany affect Finnish sawnwood exports and sawlog demand in Finland. The empirical models are estimated using quarterly time series data from 1980:1-1996:4, and the observations for 1997:1 - 1998:4 are used in analyzing the ex post forecast performance of the models. It appears that MESU is a first attempt to build a short-term forecasting system that links import demand for forest products to exporting countries' roundwood markets using econometric models. The methodological framework for the MESU system is general, so that a similar modeling approach could be applied to other countries and other forest product categories as well.
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