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Predicted and Actual Capacity Changes in the Pulp and Paper Industries of Developed Market Economies: A Test of Rational Expectations

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A comparison was done of expected and actual changes of production capacity in the pulp and paper industries of 14 major producing countries. Tests were done to determine whether the predictions used all available information in an optimal manner (full rationality). The results showed that this was not the case for 29 to 86% of the countries, depending on the length of the forecast and commodity group. Another set of tests was then done to determine if whatever information used by forecasters was used efficiently (partial rationality). Unbiasedness, a necessary condition of partial rationality, was rejected for 29 to 79% of the countries considered, depending on forecast length and commodity group. Aggregation of countries into regions did not eliminate the bias. The general tendency was for forecasters to overestimate increases in capacity. For. Sci. 34(3):606-620.

Keywords: Forecasting; econometrics; international; paperboard; production

Document Type: Journal Article

Affiliations: Research Assistant, Department of Forestry, University of Wisconsin-Madison

Publication date: September 1, 1988

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