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Speculation in agricultural land

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Author Info

  • Maurice J. Roche

    ()
    (Department of Economics, Finance and Accounting, National University of Ireland, Maynooth, Ireland)

  • Kieran McQuinn

    ()
    (Teagasc, Dublin, Ireland)

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    Abstract

    Agricultural land prices in many developed countries rose and then fell dramatically over a relatively short period of time in the late 1970s and early 1980s. Most of the models in the literature that describe the dynamic behaviour of agricultural land prices suggest that these sharp price movements were not completely due to market fundamentals. Many attribute part of this price volatility to speculation. This phenomenon is investigated by estimating a general regime-switching model that nests many types of speculative behaviour as special cases. We find strong evidence to support a partially collapsing bubbles story about Irish agricultural land prices.

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    Bibliographic Info

    Paper provided by Department of Economics, Finance and Accounting, National University of Ireland - Maynooth in its series Economics, Finance and Accounting Department Working Paper Series with number n1010700.

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    Length: 32 pages
    Date of creation: Oct 2000
    Date of revision:
    Handle: RePEc:may:mayecw:n1010700

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    Postal: Maynooth, Co. Kildare
    Phone: 353-1-7083728
    Fax: 353-1-7083934
    Web page: http://economics.nuim.ie
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    Related research

    Keywords: Speculation; Fads; Bubbles; Farmland prices;

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    References

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    1. Zivot, Eric & Andrews, Donald W K, 1992. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 251-70, July.
    2. T. A. Lloyd & A. J. Rayner, 1993. "Co-Integration Analysis And The Determinants Of Land Prices: Comment," Journal of Agricultural Economics, Wiley Blackwell, vol. 44(1), pages 149-156.
    3. D. Hallam, 1993. "Co-Integration Analysis And The Determinants Of Land Prices: Reply," Journal of Agricultural Economics, Wiley Blackwell, vol. 44(1), pages 157-159.
    4. Simon van Norden & Robert Vigfusson, 1996. "Avoiding the Pitfalls: Can Regime-Switching Tests Detect Bubbles?," Meeting papers 9603001, EconWPA.
    5. Phillips, P.C.B., 1986. "Testing for a Unit Root in Time Series Regression," Cahiers de recherche 8633, Universite de Montreal, Departement de sciences economiques.
    6. Cutler, David M & Poterba, James M & Summers, Lawrence H, 1991. "Speculative Dynamics," Review of Economic Studies, Wiley Blackwell, vol. 58(3), pages 529-46, May.
    7. Olivier J. Blanchard & Mark W. Watson, 1982. "Bubbles, Rational Expectations and Financial Markets," NBER Working Papers 0945, National Bureau of Economic Research, Inc.
    8. Tom Engsted, 1998. "Do farmland prices reflect rationally expected future rents?," Applied Economics Letters, Taylor & Francis Journals, vol. 5(2), pages 75-79.
    9. Lloyd, T A & Rayner, A J & Orme, C D, 1991. "Present-Value Models of Land Prices in England and Wales," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 18(2), pages 141-66.
    10. Ananda Weliwita & Ramu Govindasamy, 1997. "Determinants of farmland prices in the north-eastern United States: a cointegration analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 4(4), pages 211-214.
    11. Summers, Lawrence H, 1986. " Does the Stock Market Rationally Reflect Fundamental Values?," Journal of Finance, American Finance Association, vol. 41(3), pages 591-601, July.
    12. Honohan, Patrick & Conroy, Charles, 1994. "Irish Interest Rate Fluctuations in The European Monetary System," Research Series, Economic and Social Research Institute (ESRI), number GRS165.
    13. Barrett, Alan & Trace, Fergal, 1999. "The Impact of Agricultural and Forestry Subsidies on Land Prices and Land Uses in Ireland," Research Series, Economic and Social Research Institute (ESRI), number PRS35.
    14. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
    15. Flood, Robert P & Hodrick, Robert J, 1990. "On Testing for Speculative Bubbles," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 85-101, Spring.
    16. O'Connor, Robert & Conlon, Fergal, 1993. "Agricultural and Forestry Land Prices in Ireland," Research Series, Economic and Social Research Institute (ESRI), number BMI77.
    17. Barry Falk & Bong-Soo Lee, 1998. "Fads versus Fundamentals in Farmland Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(4), pages 696-707.
    18. D. Hallam & F. Machado & G. Rapsomanikis, 1992. "Co-Integration Analysis And The Determinants Of Land Prices," Journal of Agricultural Economics, Wiley Blackwell, vol. 43(1), pages 28-37.
    19. Evans, George W, 1991. "Pitfalls in Testing for Explosive Bubbles in Asset Prices," American Economic Review, American Economic Association, vol. 81(4), pages 922-30, September.
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    Cited by:
    1. Mc Quinn, Kieran, 2004. "A Model of the Irish Housing Sector," Research Technical Papers 1/RT/04, Central Bank of Ireland.
    2. Benjamas Jirasakuldech & Robert Campbell & John Knight, 2006. "Are There Rational Speculative Bubbles in REITs?," The Journal of Real Estate Finance and Economics, Springer, vol. 32(2), pages 105-127, March.
    3. Woltjer, Geert B. & Luijt, Jan L. & Jongeneel, Roelof A., 2008. "A Land Market Cycle in the Netherlands," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44376, European Association of Agricultural Economists.
    4. Jakob B Madsen, 2011. "A q Model of House Prices," Development Research Unit Working Paper Series 03-11, Monash University, Department of Economics.
    5. James Payne & George Waters, 2007. "Have Equity REITs Experienced Periodically Collapsing Bubbles?," The Journal of Real Estate Finance and Economics, Springer, vol. 34(2), pages 207-224, February.

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