Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/63875
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dc.contributor.authorAlvarez, Luis H.R.en_US
dc.contributor.authorKoskela, Erkkien_US
dc.date.accessioned2012-09-21T11:27:55Z-
dc.date.available2012-09-21T11:27:55Z-
dc.date.issued2003en_US
dc.identifier.urihttp://hdl.handle.net/10419/63875-
dc.description.abstractThe current literature on optimal forest rotation makes the unrealistic assumption of constant interest rate though harvesting decisions of forest stands are typically subject to relatively long time horizons. We apply the single rotation framework to extend the existing studies to cover the unexplored case of variable interest rate. We show that even in the deterministic case if the current interest rate deviates from its long-run steady state, interest rate variability may change the rotation age significantly when compared with the constant discounting case. Further, and importantly, allowing for interest rate uncertainty as a mean reverting process and forest value as a geometric Brownian motion we can provide an explicit solution for the two dimensional path-dependent optimal stopping problem. Increased interest rate volatility is shown to lengthen the optimal rotation period. Numerical calculations show that interest rate volatility has a big quantitative importance.en_US
dc.language.isoengen_US
dc.publisher|aThe Research Institute of the Finnish Economy (ETLA) |cHelsinkien_US
dc.relation.ispartofseries|aETLA Discussion Papers, The Research Institute of the Finnish Economy (ETLA) |x840en_US
dc.subject.jelQ23en_US
dc.subject.jelG31en_US
dc.subject.jelC61en_US
dc.subject.ddc330en_US
dc.subject.keywordOptimal rotationen_US
dc.subject.keywordvariable interest ratesen_US
dc.subject.keywordoptimal stoppingen_US
dc.subject.keywordfree boundary problemsen_US
dc.subject.stwZinsen_US
dc.subject.stwRessourcenökonomiken_US
dc.subject.stwTheorieen_US
dc.titleOn forest rotation undet interest rate variabilityen_US
dc.typeWorking Paperen_US
dc.identifier.ppn359235565en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US

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