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Fads versus Fundamentals in Farmland Prices: Comment
Author(s) -
Roche Maurice J.
Publication year - 2001
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/0002-9092.00231
Subject(s) - citation , constructive , library science , operations research , computer science , engineering , process (computing) , operating system
A 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.