Current issue: 53(1)
Under compilation: 53(2)
Short run market forecasting is desirable both for adjusting production and for regulating the national employment policy. In this study a forecast is made for one product. The purpose of the study is to develop a short run model describing newsprint sales in Finland that will combine mathematical simplicity, accuracy of description and universality.
Two methods of selecting variables seemed to be available. According to the first, newsprint consumption is divided into components, each of which is considered separately. The second method, which proved more fruitful, starts out directly from factors influencing the publishers’ decisions in purchasing newsprint, eliminating the least significant intuitively and simultaneously determining the lags.
The models developed in this study are capable of forecasting potential consumption. Even the best models in this study are multicollinear. The further into the future a forecast is extended, the greater is the possibility that relationships between the explanatory variables will change. It is intended that the newsprint seller will profit from the models achieved by using them to forecast sales in a future period, so that he can avoid both loss of interest due to acquiring a surplus of raw material or acute shortages of raw material.
The PDF includes a summary in Finnish.
Factors determining newsprint consumption in Finland in 1960–1986 were analysed. An econometric recursive multi-equation model describing the structure of the newspaper industry was formulated and estimated to obtain information on direct factors influencing newsprint demand. Short-term and long-term demand elasticities for newspapers and newspaper advertising were estimated.
The results indicate that the main factors affecting newsprint consumption are total circulation of newspapers, volume of newspaper advertising and the change in newsprint substance weight. Total newspaper circulation was found to depend on the rate of household formation and real household income changes. Demand for newspapers was shown to be price-inelastic. Structural analysis indicates that income elasticity of newspaper demand has increased slightly over time.
The volume of newspaper advertising was shown to affect newsprint consumption via the effects on pagination. Newspaper and television advertising were found to be independent of each other. The impact of the reduction in the basis weight was found to be substantial. The estimation of long-term elasticities of demand for newspapers and newspaper advertising using dynamic models revealed that demand rigidities exist.
The case study of Finland proposes three reasons why newsprint demand has not shown clear signs of reaching a saturation level. First, although population growth has stagnated in major consuming countries, the number of households has been increasing continuously. Second, income elasticity of newspaper demand does not show a declining trend. Third, the main driving force behind the buoyant demand is the resurgence of demand for newspaper as an advertising medium. In forecasting newsprint consumption, in addition to projections of economic growth, attention must be paid to the rate of household formation, the development of the advertising sector, the factors affecting competition between alternative media and the resulting media-mix in advertising, and changes in the substantial weight.
The PDF includes a summary in Finnish