Policy simulation in the natural resource sector

A simulation framework suitable for the quantitative assessment of policies in the natural resource sector is considered. It is based on a combination of conventional econometric methods with technical and engineering models which describe the input- output and environmental relationships of the natural resource sector. A detailed study of the effect of fiscal and monetary poli cies on the housing market and on the resource industries sup plying housing materials is considered for purpose of illustration, with particular emphasis on the wood (lumber and plywood) used in housing. A validated 30-equation simulation model has been constructed. This describes the housing market, materials used in housing, production functions for these materials, and environmental effects of this production activity. A sample policy simulation is given. The main contribution of the work has been the updating of an existing housing model and the development of its linkages with the lumber and plywood sector.