Testing for regime-switching behaviour in Finnish agricultural land prices

Juho Valtiala

Agricultural Finance Review, 2020, vol. 81, issue 2, 292-305

Abstract: Purpose - This study analyses agricultural land price dynamics in order to better understand price development and to improve forecast accuracy. Understanding the evolution of agricultural land prices is important when considering sound investment decisions. Design/methodology/approach - This study applies threshold autoregression to model agricultural land prices. The data includes quarterly observations on Finnish agricultural land prices. Findings - The study shows that Finnish agricultural land prices exhibit regime-switching behaviour when using past changes in prices as a threshold variable. The threshold autoregressive model not only fits the data better but also improves the accuracy of price forecasts compared to the linear autoregressive model. Originality/value - The results show that a sharp fall in agricultural land prices temporarily changes the regular development of prices. This information significantly improves the accuracy of price predictions.

Keywords: Agricultural land prices; Threshold autoregression; Forecasting (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eme:afrpps:afr-03-2020-0037

DOI: 10.1108/AFR-03-2020-0037

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