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Since Hurricane Hugo struck coastal and inland regions of South Carolina in late September, 1989, analysts have predicted its effects on prices, production, and welfare. We estimate the effects of the hurricane on South Carolina coastal pine sawtimber and pulpwood stumpage prices. By subtracting from South Carolina price series other cointegrated stumpage price series of other parts of the South, we are able to identify the effects of the hurricane. Modeling required use of only two dummies and the lagged subtracted quarterly real price series. These models explained over about 45 to 60 percent of the variation of most subtracted real price series, which covered 1977:1 to 1996:4. Results imply that Hurricane Hugo caused sawtimber prices to drop by around 35 percent in real terms immediately after the hurricane and that prices recovered within seven quarters to the pre-Hugo equilibrium, implying no detectable, persistent price effects. For pulpwood stumpage, Hugo induced a short-run crash by 60 percent of the prevailing, pre-Hugo real price. Highly statistically significant results also show that prices in South Carolina have since remained about 35 percent below what prices would have been had Hugo never struck the region. These findings suggest that sawtimber markets in South Carolina adjust quickly in response to large shocks but that pulpwood consumers have not been able to fully exploit the cheaper raw material that continues to enter the state's market. See Timber Price Dynamics Following a Natural Catastrophe for a followup on the same topic.
Fiscal Year: fy98 ·
Problem Area: pa98-1 ·
Theme: cctrgnas ·
Source: resunit
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Forest Economics and Policy |
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USDA Forest Service Southern Research Station |