United States demand for hardwood plywood imports: A distributed lag model

A theoretical model of the United States demand for hardwood plywood imports was developed. Demand derives from activity in the construction industry where costs are minimised subject to a generalised Cobb-Douglas technology. This static model was then modified to reflect dynamic adjustments of imports to prices and housing starts. The resulting model was estimated with monthly data for the period January, 1974 to December, 1979. The choice of either c.i.f., f.a.s. or customs data did not significantly affect the statistical results. No significant substitution was apparent between imported hardwood plywood and domestic hardwood or softwood plywood. Import data appeared to be explained by expectations on housing starts and relative prices. Importers' expectations were represented by Cagan's adaptive expectations model and by Almon's polynomial lag equation. The latter model, relating imports to (i) housing starts and (ii) import prices, gave significantly better results. The maximum lag was of 9 months, with a mean lag of 4·5 months. The long-term elasticity of imports with respect to housing starts was estimated at 1·10 (±0·12). The long-term elasticity with respect to real price was ?1·98 (±0·24), using the price of all commodities as the deflator.