An econometric analysis of imported timber demand in Turkey

Abstract

This paper attempts to understand and explain determinants of Turkish demand for foreign timber imported to Turkey. Explanatory variables in the propounded model include price of imported timber, price of domestically-produced sawlog as an imperfect substitute, income per capita, country population, and capacity utilization rates (CUR's) and industrial production indices (IPI's) of forest industry sectors. For empirical purpose we used a time series data covering the 15-year period between 1995 and 2009. The econometric model set for there appears to be able to explain more than 96% of the variation in demand for imported timber, with all of the parameter estimates, except for population parameter, being statistically significant. Estimation results confirm the existence of the price elasticity and substitute cross-price elasticity of demand for imported timber. Results also imply that the Turkish firms importing timber tend to consider domestic sawlog prices as much as, even more than, the price of foreign timber. The hypothesized effects of production changes in wood products and furniture industries on imported timber demand do not appear to be substantiated by this study, which can partly be attributed to the partial method of measuring CUR's and IPI's. Meanwhile, possible effects of income, population and exchange rate index of the Turkish currency on the imported timber demand of the country are not evidenced by the empirical findings of this research. Finally, our model forecasts, ceteris paribus, that by 2016 the level of Turkish demand for imported timber demand can reasonably be expected to exceed 2 million m(3)/year. This corresponds to the level of timber import observed in the years preceding the global economic crisis in 2009.