The existence and direction of causal relationships between the time series for the Finnish roundwood market for the period 1960–1994 is tested. Using simple bivariate analysis, we found evidence that for both logs and pulpwood, the lagged prices are helpful in forecasting quantity for the next year, but not vice versa. Saw log stumpage prices have significantly Granger-caused pulpwood prices over the business cycles, but the effect has diminished towards the present time. For quantities traded, the direction of causality was rather from pulpwood to saw logs. The consistency of bivariate test results was checked by the Granger-causality tests within trivariate VAR-models for both markets, and the results were found to be fairly similar to bivariate tests. The price fluctuations in the international markets for forest products have been found to be carried to domestic wood markets dominantly via the pulpwood part of the market.
The need for the planning and analysing of public policy has increased in economic and social policy, along with the expansion of the public sector, i.e. as the number of aims of the policy has increased and the objects of it have become more versatile, the objects of allocation have likewise been multiplied. In addition, the significance of planning a public forest policy has been emphasized by many economic and social changes in forestry and the timber economy.
The purpose of the present paper is to outline a general frame of reference for empirical policy analysis, upon which the effectiveness analysis of forest policy is also based. The approach serves as a methodological frame for the empirical analysis, presented in the following paper of this issue of Silva Fennica, in which econometric methods are applied to the examination of the effect of public forest policy.