This thesis explores the correlation between timber prices and house prices in Sweden from 1998Q1 to 2022Q4, with a specific emphasis on fir and pine timber wood.

The Engel-Granger two-step method is employed as the primary econometric methodology, which includes a cointegration test and an error correction model. This approach is used to determine whether there is a long-term equilibrium relationship between timber and house prices, and how deviations from this equilibrium are corrected in the short run. The variables are subjected to tests for multicollinearity, unit root using the augmented Dickey-Fuller test, and serial correlation test to ensure the robustness of the model. The hypothesis posits a positive relationship between timber and house prices, both in the short and long run.

The analysis of quarterly data for Sweden between 1998 and 2020 supports this hypothesis, but only for pine timber prices.

The findings provide insights into the dynamics of the housing market in Sweden and the influence of timber prices, particularly during periods of increased global demand for timber. This study contributes to the understanding of the interplay between natural resource abundance, global market forces, and domestic housing prices.