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Farmland returns and economic conditions: a FAVAR approach

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Abstract

This study examines the linkages between farmland returns and other market forces including the returns to alternative investments, agricultural sector activity, non-farm real estate, and macroeconomic conditions over the period 1973–2008. The study applies factor-augmented vector autoregression to extract information from a large panel of economic time series. Results suggest that farmland returns are influenced by common trends in the returns to alternative investments and general macroeconomic conditions.

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Author information

Authors and Affiliations

  1. Economic Research Service, 1400 Independence Ave. SW, Mail Stop 1800, Washington, DC, 20250-1800, USA

    Todd H. Kuethe & Mitch Morehart

  2. University of Wisconsin-River Falls, 410 S. 3rd Street, River Falls, WI, 54022, USA

    Todd Hubbs

Authors
  1. Todd H. Kuethe
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  2. Todd Hubbs
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  3. Mitch Morehart
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Corresponding author

Correspondence to Todd H. Kuethe.

Additional information

The views expressed are those of the authors and should not be attributed to ERS or USDA.

Appendices

Appendix 1: Data series and estimated factors

The data consists of a balanced panel of 52 economic series divided into four categories: financial markets, agricultural sector, real estate sector, and general macroeconomic variables. The series are in annual frequency spanning 1973–2008.

See Appendix Tables 4, 5, 6 and 7.

Table 4 Financial market data series
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Table 5 Agricultural sector data series
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Table 6 Real estate sector data series
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Table 7 Macroeconomic data series
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Figure 2 plots farmland returns and the market fundamentals as measured by each of the estimated diffusion indexes. In each graph, the left vertical axis measures the observed farmland returns, and the right horizontal axis measures the value of the diffusion index.

Appendix 2: Generalized impulse response functions

See Appendix Figs. 2, 3, 4, 5 and 6.

Fig. 2
figure 2

Estimated diffusion indexes

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Fig. 3
figure 3

Generalized impulse response functions—financial market diffusion index

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Fig. 4
figure 4

Generalized impulse response functions—agricultural sector diffusion index

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Fig. 5
figure 5

Generalized impulse response functions—real estate diffusion index

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Fig. 6
figure 6

Generalized impulse response function—macroeconomic diffusion index

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Kuethe, T.H., Hubbs, T. & Morehart, M. Farmland returns and economic conditions: a FAVAR approach. Empir Econ 47, 129–142 (2014). https://doi.org/10.1007/s00181-013-0730-5

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  • DOI: https://doi.org/10.1007/s00181-013-0730-5

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