Modeling Nonlinearities in Farmland Values: A Dynamic Panel Threshold Error-Correction Model
AbstractEarlier studies usually indicate that farmland prices and cash rents are not cointegrated, a finding that seems at odds with the implications of the present value model. The main objective of this study is to explore whether this absence of empirical support for the present value model can be attributed to the restrictiveness of conventional time series methods. I suggest a panel unit root model with two regimes in which the adjustment process may be characterized by the presence of thresholds and discontinuities reflecting the presence of transactions costs and other barriers to adjustment. Using farmland value and cash rents data for 10 agricultural states of the U.S. between 1960 and 2008, empirical findings give modest improvement over the linear unit root process. It is suggested that there might be a bias caused by cross sectional dependence and an inadequate time span of the data.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Agricultural and Applied Economics Association in its series 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin with number 49445.
Date of creation: 30 Apr 2009
Date of revision:
Contact details of provider:
Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202
Phone: (414) 918-3190
Fax: (414) 276-3349
Web page: http://www.aaea.org
More information through EDIRC
Present Value Model; Transactions costs; Thresholds; Panel unit root; Land Economics/Use; Research Methods/ Statistical Methods;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-05-16 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fontnouvelle, P. de & Lence, Sergio H., 2002. "Transaction Costs and the Present Value," Staff General Research Papers 5263, Iowa State University, Department of Economics.
- Bruce E. Hansen & Mehmet Caner, 1997.
"Threshold Autoregressions with a Unit Root,"
Boston College Working Papers in Economics
381, Boston College Department of Economics.
- Kaddour Hadri, 2000.
"Testing for stationarity in heterogeneous panel data,"
Royal Economic Society, vol. 3(2), pages 148-161.
- Kaddour Hadri, 1999. "Testing For Stationarity In Heterogeneous Panel Data," Research Papers 1999_04, University of Liverpool Management School.
- Tom Doan, . "HADRI: RATS procedure to implement Hadri test for unit roots in panel data," Statistical Software Components RTS00084, Boston College Department of Economics.
- Luciano Gutierrez & Joakim Westerlund & Kenneth Erickson, 2007. "Farmland prices, structural breaks and panel data," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 34(2), pages 161-179, June.
- Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990.
"Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?,"
8905, Michigan State - Econometrics and Economic Theory.
- Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
- Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
- Jean-Paul Chavas & Alban Thomas, 1999. "A Dynamic Analysis of Land Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 772-784.
- Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003.
"Testing for unit roots in heterogeneous panels,"
Journal of Econometrics,
Elsevier, vol. 115(1), pages 53-74, July.
- Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
- Tom Doan, . "IPSHIN: RATS procedure to implement Im, Pesaran and Shin panel unit root test," Statistical Software Components RTS00098, Boston College Department of Economics.
- Falk, Barry L., 1991. "Formally Testing the Present Value Model of Farmland Prices," Staff General Research Papers 11093, Iowa State University, Department of Economics.
- Bohl, Martin T. & Siklos, Pierre L., 2004. "The present value model of U.S. stock prices redux: a new testing strategy and some evidence," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(2), pages 208-223, May.
- Tom Engsted, 1998. "Do farmland prices reflect rationally expected future rents?," Applied Economics Letters, Taylor & Francis Journals, vol. 5(2), pages 75-79.
- Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 249-272, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If references are entirely missing, you can add them using this form.