Determinants of farmland prices in the north-eastern United States: a cointegration analysis

We examine the determinants of land prices in the north-eastern United States by applying Johansen and Juselius maximum-likelihood cointegration procedure to two recent land price models. The results suggest that there is an equilibrium relationship between real land price and real gross farm income, inflation rate, interest rate, and land area. We found that both real and nominal interest rates are cointegrated with land prices. These findings support recent suggestions that interest rate plays a more significant role in determining land prices than previously thought.