DO FARMLAND PRICES REFLECT RATIONALLY EXPECTED FUTURE RENTS

In recent years the Present Value (PV) model has been used extensively to interpret the behaviour of farmland prices. In this paper the rati onal 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 an d rents are integrated of order one and cointegrated. The results indi cate that the underlying equilibrium model used by Tegene and Kuchler to reject bubbles is seriously at odds with the data.