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Timber Price Dynamics Following a Natural Catastrophe

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  • Jeffrey P. Prestemon
  • Thomas P. Holmes
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    Abstract

    Catastrophic shocks to existing stocks of a renewable resource can cause long-run price shifts. With timber, these long-run price shifts may be accompanied by a short-run price drop due to salvage. Hurricane Hugo damaged 20% of southern pine timber in the South Carolina Coastal Plain in 1989. To estimate the short- and long-run effects of the hurricane on the prices of timber stocks, we estimated an intervention model of the residuals of cointegration of South Carolina sawtimber and pulpwood stumpage prices with prices of similar products from other regions. Modeling revealed a 30% negative price spike due to salvage and a long-run enhancement effect, leading to prices that are 10% to 30% higher than they would have been had Hugo not occurred. Copyright 2000, Oxford University Press.

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    File URL: http://hdl.handle.net/10.1111/0002-9092.00012
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    Bibliographic Info

    Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

    Volume (Year): 82 (2000)
    Issue (Month): 1 ()
    Pages: 145-160

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    Handle: RePEc:oup:ajagec:v:82:y:2000:i:1:p:145-160

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    Cited by:
    1. Mehrotra, Shiv N. & Kant, Shashi, 2009. "Use of composite forest commodity price indices for cointegration analysis," Journal of Forest Economics, Elsevier, vol. 15(4), pages 237-260, December.
    2. Amacher, Gregory S. & Malik, Arun S. & Haight, Robert G., 2005. "Nonindustrial private landowners, fires, and the wildland-urban interface," Forest Policy and Economics, Elsevier, vol. 7(5), pages 796-805, August.
    3. Tim Bogle & G. Cornelis van Kooten, 2011. "What Makes Mountain Pine Beetle a Tricky Pest? Difficult Decisions when Facing Beetle Attack in a Mixed Species Forest," Working Papers 2011-07, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
    4. González-Gómez, Manuel & Álvarez-Díaz, Marcos & Otero-Giráldez, María Soledad, 2013. "Estimating the long-run impact of forest fires on the eucalyptus timber supply in Galicia, Spain," Journal of Forest Economics, Elsevier, vol. 19(2), pages 149-161.
    5. Benjamin Collier & Ani L. Katchova & Jerry R. Skees, 2011. "Loan portfolio performance and El Niño, an intervention analysis," Agricultural Finance Review, Emerald Group Publishing, vol. 71(1), pages 98-119, May.
    6. Prestemon, Jeffrey P. & Wear, David N. & Stewart, Fred J. & Holmes, Thomas P., 2006. "Wildfire, timber salvage, and the economics of expediency," Forest Policy and Economics, Elsevier, vol. 8(3), pages 312-322, April.
    7. Yin, Runsheng & Newman, David H. & Siry, Jacek, 2002. "Testing for market integration among southern pine regions," Journal of Forest Economics, Elsevier, vol. 8(2), pages 151-166.
    8. Yin, Runsheng & Xu, Jintao, 2003. "Identifying the inter-market relationships of forest products in the Pacific Northwest with cointegration and causality tests," Forest Policy and Economics, Elsevier, vol. 5(3), pages 305-315, September.
    9. Bingham, Matthew F. & Prestemon, Jeffrey P. & MacNair, Douglas J. & Abt, Robert C. & Bingham, Matthew F., 2003. "Market structure in U. S. southern pine roundwood," Journal of Forest Economics, Elsevier, vol. 9(2), pages 97-117.
    10. Grover, Mansi & Bosch, Darrell J. & Preisley, Stephen P., 2005. "Effects of Private Insurance on Forest Landowners' Incentives to Sequester and Trade Carbon under Uncertainty: Impact of Hurricanes," 2005 Annual meeting, July 24-27, Providence, RI 19516, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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