Farmland cash rents and the dollar |
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Authors: | Sharmistha Nag Jeffrey J Reimer |
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Institution: | 1. National Council of Applied Economic Research, Parisila Bhawan, 11‐Indraprastha Estate, New Delhi 110002, India;2. Department of Agricultural and Resource Economics, 213 Ballard Extension Hall, Oregon State University, Corvallis, OR 97331, USA |
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Abstract: | We explore whether the U.S. exchange rate could have an influence on cash rental rates for farmland in five U.S. cornbelt states. We find that farmland cash rents have a fairly strong, positive correlation with the U.S. dollar, in terms of its real value relative to major agricultural trading partners. One explanation for the correlation is that a strong dollar lowers the price of key inputs and thus has purchasing power effects. A strong dollar may therefore be associated with higher net returns, and the payment of higher cash rents by farmers. We find support for this hypothesis through a series of econometric models. |
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Keywords: | E31 F31 Q15 Q24 Cash rents Exchange rates Imported inputs Inflation |
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