A primary econometric approach to modeling and forecasting the demand for fuelwood in Turkey

Abstract

A primary econometric approach is presented to understand the determinants of variation in national demand for domestically-produced fuelwood in Turkey. Also included in this study is a demand forecast for fuelwood based upon the econometric model proposed in this study. Being in multiplicative form originally, the proposed model is converted in to a double-log or log-linear form, for the ease of immediate interpretation of the parameter estimates in respect of elasticities. Parameter estimation is based on a panel and time series data set that belongs to the 15-year period between 1995 and 2009. The demand forecast presented has a horizon of 7 years beyond 2009. Major findings of the research include: 1) fuelwood demand in Turkey appears to conform to the law of demand with an inverse price-demand relationship; 2) fuelwood demand is notably price-sensitive with relatively high price elasticity; 3) fuelwood does not appear to be a related (complementary or substitute) good with coal and natural gas; and 4) fuelwood in Turkey is likely to be a "normal good" in respect of demand-income relationship. Meanwhile, based upon the proposed model here, fuelwood demand in Turkey may reasonably continue to show a downward trend till a level of 5 million m(3) per annum, which is an about 50% reduction from the demand level in 1995. Further research is particularly needed for Turkey in view of the rapidly changing socio-economic profile of rural and urban population, which is being reflected in the demand for energy from wood in forms besides wood in the raw.