Forecasting the German forest products trade: A vector error correction model

In the forest sector often very complex models are used that take into account a variety of factors. In addition to variables that describe the natural production of wood, into these models flow among others also such variables that depict nature conservation legislation, market contexts, etc. The limited availability of large amounts of data and more particularly of precise data to all these subject areas considerably weakens the validity of the models. Our study therefore takes up the challenge to develop a model, as simple as possible, that can help to estimate export and import volumes as well as export and import prices of raw timber in Germany. To this end, we apply the technique of time series analysis and develop a simple model that allows for short-term and medium-term forecasting in the German forest sector. We show that using a vector error correction model (VECM) can succeed in a relatively simple modelling of future quantities and prices of raw timber for Germany.