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Financial Accelerator at Work: Evidence from Corn Fields

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Listed:
  • Nittai K. Bergman
  • Rajkamal Iyer
  • Richard T. Thakor

Abstract

This paper tests financial accelerator models. Using a novel dataset on agricultural production, we examine how exogenous productivity shocks arising from variation in temperature are propagated into the future. We find that past weather shocks have persistent effects on land values and productivity up to two years following the shock. Propagation and amplification of productivity shocks are both significantly larger during the farm debt crisis of the 1980s and amongst farms in lower income counties. Finally, we find higher investment in farm equipment and decreased borrowing following a positive weather shock.

Suggested Citation

  • Nittai K. Bergman & Rajkamal Iyer & Richard T. Thakor, 2015. "Financial Accelerator at Work: Evidence from Corn Fields," NBER Working Papers 21086, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:21086
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    3. Nicolas Crouzet & Neil R. Mehrotra, 2018. "Small and Large Firms Over the Business Cycle," Working Papers 18-09, Center for Economic Studies, U.S. Census Bureau.

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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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