Financial Accelerator at Work: Evidence from Corn Fields

49 Pages Posted: 13 Apr 2015 Last revised: 24 Apr 2015

See all articles by Nittai Bergman

Nittai Bergman

Tel Aviv University; National Bureau of Economic Research (NBER)

Rajkamal Iyer

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Richard T. Thakor

University of Minnesota - Carlson School of Management

Date Written: April 2015

Abstract

This paper tests financial accelerator models. Using a novel dataset on agricultural production, we examine how exogenous productivity shocks arising from variation in temperature are propagated into the future. We find that past weather shocks have persistent effects on land values and productivity up to two years following the shock. Propagation and amplification of productivity shocks are both significantly larger during the farm debt crisis of the 1980s and amongst farms in lower income counties. Finally, we find higher investment in farm equipment and decreased borrowing following a positive weather shock.

Suggested Citation

Bergman, Nittai and Iyer, Rajkamal and Thakor, Richard T., Financial Accelerator at Work: Evidence from Corn Fields (April 2015). NBER Working Paper No. w21086. Available at SSRN: https://ssrn.com/abstract=2593665

Nittai Bergman (Contact Author)

Tel Aviv University

Ramat Aviv
Tel-Aviv, 6997801
Israel

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Rajkamal Iyer

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Richard T. Thakor

University of Minnesota - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

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