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Modelling of uncertainty in the economic development of the Norwegian forest sector

Author

Listed:
  • Jåstad, Eirik Ogner
  • Mustapha, Walid Fayez
  • Bolkesjø, Torjus Folsland
  • Trømborg, Erik
  • Solberg, Birger

Abstract

Quantitative forest sector modelling includes many model parameters that are treated as being deterministic in the modelling framework, but are in reality often highly uncertain. Few studies have addressed the impacts of this uncertainty and the main objectives of this article are to quantify major market uncertainties in the Norwegian forest sector and analyse their impacts on the results of a forest sector model study for Norway. The uncertainties are derived from historical time series of the prices and exchange rates for international forest products, and their possible impacts are addressed by applying a Monte Carlo approach. A probabilistic approach in modelling is found to have significant impacts on harvest and forest industry production levels. When uncertainty is included, the relative standard deviation for modelled harvest levels varies from 15% to 45%, while for forest products the standard deviations vary from 30% to 80%. We conclude that the most important uncertainty factor for the Norwegian forest sector is the development of international forest product markets, and improved data on demand should be given high priority in future forest sector modelling development.

Suggested Citation

  • Jåstad, Eirik Ogner & Mustapha, Walid Fayez & Bolkesjø, Torjus Folsland & Trømborg, Erik & Solberg, Birger, 2018. "Modelling of uncertainty in the economic development of the Norwegian forest sector," Journal of Forest Economics, Elsevier, vol. 32(C), pages 106-115.
    • Handle: RePEc:eee:foreco:v:32:y:2018:i:c:p:106-115
    DOI: 10.1016/j.jfe.2018.04.005
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    References listed on IDEAS

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    1. Moiseyev, Alexander & Solberg, Birger & Kallio, A. Maarit I., 2014. "The impact of subsidies and carbon pricing on the wood biomass use for energy in the EU," Energy, Elsevier, vol. 76(C), pages 161-167.
    2. Latta, Gregory S. & Sjølie, Hanne K. & Solberg, Birger, 2013. "A review of recent developments and applications of partial equilibrium models of the forest sector," Journal of Forest Economics, Elsevier, vol. 19(4), pages 350-360.
    3. Buongiorno, Joseph, 1996. "Forest sector modeling: a synthesis of econometrics, mathematical programming, and system dynamics methods," International Journal of Forecasting, Elsevier, vol. 12(3), pages 329-343, September.
    4. Tromborg, Erik & Bolkesjo, Torjus Folsland & Solberg, Birger, 2007. "Impacts of policy means for increased use of forest-based bioenergy in Norway--A spatial partial equilibrium analysis," Energy Policy, Elsevier, vol. 35(12), pages 5980-5990, December.
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    More about this item

    Keywords

    Forest sector modelling; Monte Carlo; Norway; Partial equilibrium; Short-term uncertainty; Uncertainty;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry

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