Journal Article

Examining the Relationships between Land Values and Credit Availability


Abstract: Given the changes made to the agricultural lending system since the 1980s farm crisis, we investigate the current effects of credit availability on land values. Using data from Federal Reserve Agricultural Credit Surveys, we measure credit availability and perform county-level panel fixed effects estimations controlling for land value determinants, credit availability factors, and county and macroeconomic factors. We build an indicator of increased credit availability and find that estimating farmland values with different factors of credit availability separately could mask combined effects. When conditions for credit availability increase or remain unchanged from the previous year, land values may increase by up to 25 percent. While higher credit availability may facilitate land acquisition, it can also put upward pressure on land values.

Keywords: Land values; Interest rates; Fixed effects; Ag Credit Survey; Farm loans;

JEL Classification: G21; Q14; Q15;

https://doi.org/10.18651/RWP2020-02

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Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Economic Review

Publication Date: 2020-05-11

Order Number: RWP 2020-02