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Measuring liquidity in agricultural land markets

Author

Listed:
  • Marlene Kionka
  • Martin Odening
  • Jana Plogmann
  • Matthias Ritter

Abstract

Purpose - Liquidity is an important aspect of market efficiency. The purpose of this paper is threefold: first, this paper aims to discuss indicators that provide information about liquidity in agricultural land markets. Second, this paper aims to reflect on determinants of market liquidity and analyze the relationship with land prices. Third, this paper aims to conduct an empirical analysis for Germany that illustrates these concepts and allows hypothesis testing. Design/methodology/approach - This study reviews liquidity dimensions and measurement in financial markets and derives indicators applicable to farmland markets. In an empirical analysis, this study exhibits the spatial and temporal variability of land market liquidity in Lower Saxony, a German federal state with the highest agricultural production value. This study uses a rich dataset that includes 72,547 sale transactions of arable land between 1990 and 2018. The research focuses on volume-based (number of transactions, volume and turnover) and time-based (trading frequency and durations) measures. A panel vector autoregression and Granger causality tests are applied to investigate the relation between land turnover and land prices. Findings - The paper confirms the thinness of farmland markets but also reveals regional and temporal heterogeneity of land market liquidity. This study finds that the relation between market liquidity and prices is ambiguous. This study concludes that a high demand from expanding farms absorbs supply shocks regardless of the current price level in agricultural land markets. Originality/value - Even though the relevance of agricultural land markets’ thinness is widely acknowledged in the literature, this paper is one of the first attempts to measure liquidity in agricultural land markets and to explain its relationship with land prices.

Suggested Citation

  • Marlene Kionka & Martin Odening & Jana Plogmann & Matthias Ritter, 2021. "Measuring liquidity in agricultural land markets," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 82(4), pages 690-713, September.
    • Handle: RePEc:eme:afrpps:afr-03-2021-0037
    DOI: 10.1108/AFR-03-2021-0037
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    Cited by:

    1. Appel, Franziska & Balmann, Alfons & Filler, Günther & Jänicke, Clemens & Odening, Martin & Schmidt, Lorenz, "undated". "Stellungnahme zum Entwurf des Gesetzes zum Erhalt und zur Verbesserung der brandenburgischen Agrarstruktur," FORLand Project Publications 334725, University of Natural Resources and Applied Life Sciences, Vienna, Department of Economics and Social Sciences.
    2. Maximilian Humpesch & Stefan Seifert & Alfons Balmann & Silke Hüttel, 2022. "How does tenancy affect farmland prices? Effects of lease status, lease term and buyer type," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 83(2), pages 242-263, September.

    More about this item

    Keywords

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    JEL classification:

    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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