Fads versus fundamentals in farmland prices: comment
AbstractA trivariate vector autoregression time series process, based on a present-value land price model, is used to decompose Iowa farmland prices into fundamental and non-fundamental components. A recent study, by Falk and Lee (1998), found that non-fundamental shocks are an important source of volatility in farmland prices and it was interpreted that these price movements were due to fads not speculative bubbles. We argue to the contrary and use a regime-switching model to provide evidence that supports a partially collapsing bubble story of the dynamics of Iowa farmland prices.
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Bibliographic InfoPaper 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 n1070301.
Length: 13 pages
Date of creation: Mar 2001
Date of revision:
Vector autoregression; Regime-switching; Farmland prices; Bubbles;
Find related papers by JEL classification:
- Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
- Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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- 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.
- 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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- Turvey, Calum G., 2002. "Can Hysteresis And Real Options Explain The Farmland Valuation Puzzle?," Working Papers 34131, University of Guelph, Department of Food, Agricultural and Resource Economics.
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