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Do farmland prices reflect rationally expected future rents?

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  • Tom Engsted

Abstract

In recent years the Present Value (PV) model has been used extensively to interpret the behaviour of farmland prices. In this paper the rational expectations version of the PV-model used by Tegene and Kuchler (1993) to test for bubbles is examined using long time-series data for land prices and rents in three US agricultural regions. The tests are based on a VAR methodology that takes into account that land prices and rents are integrated of order one and cointegrated. The results indicate that the underlying equilibrium model used by Tegene and Kuchler to reject bubbles is seriously at odds with the data.

Suggested Citation

  • Tom Engsted, 1998. "Do farmland prices reflect rationally expected future rents?," Applied Economics Letters, Taylor & Francis Journals, vol. 5(2), pages 75-79.
  • Handle: RePEc:taf:apeclt:v:5:y:1998:i:2:p:75-79
    DOI: 10.1080/758523507
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    Citations

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    Cited by:

    1. Maurice J. Roche & Kieran McQuinn, 2000. "Speculation in agricultural land," Economics, Finance and Accounting Department Working Paper Series n1010700, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
    2. Thibodeau, David R. & Clark, J. Stephen, 2009. "Government support, transfer efficiency, and moral hazard within heterogeneous regions in Canadian Agriculture," 2009 Conference, August 16-22, 2009, Beijing, China 51806, International Association of Agricultural Economists.
    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. Onel, Gulcan, 2009. "Modeling Nonlinearities in Farmland Values: A Dynamic Panel Threshold Error-Correction Model," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49445, Agricultural and Applied Economics Association.
    5. Saguatti, Annachiara & Erickson, Kenneth & Gutierrez, Luciano, 2014. "Spatial panel models for the analysis of land prices," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182757, European Association of Agricultural Economists.
    6. Engsted, Tom, 2002. " Measures of Fit for Rational Expectations Models," Journal of Economic Surveys, Wiley Blackwell, vol. 16(3), pages 301-355, July.
    7. Saguatti, Annachiara & Erickson, Kenneth & Gutierrez, Luciano, 2014. "Spatial panel models for the analysis of land prices," 2014 Third Congress, June 25-27, 2014, Alghero, Italy 172997, Italian Association of Agricultural and Applied Economics (AIEAA).
    8. Gabruch, Mandy L. & Micheels, Eric T., 2017. "2016 WAEA Winning Student Submission: The Effect of Saskatchewan's Ownership Restrictions on Farmland Values," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 42(1), January.

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