Financial Accelerator at Work: Evidence from Corn Fields

Nittai K. Bergman, Rajkamal Iyer, Richard T. Thakor

NBER Working Paper No. 21086
Issued in April 2015
NBER Program(s):   CF   EFG   PR

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.

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Document Object Identifier (DOI): 10.3386/w21086

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