On the Dynamic Relationship between U.S. Farm Income and Macroeconomic Variables
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This study examines the short- and long-run effects of changes in macroeconomic
variables—agricultural commodity prices, interest rates and exchange rates—on the U.S.
farm income. For this purpose, we adopt an autoregressive distributed lag (ARDL) approach
to cointegration with quarterly data for 1989–2008. Results show that the exchange rate
plays a crucial role in determining the long-run behavior of U.S. farm income, but has little
effect in the short-run. We also find that the commodity price and interest rate have
been significant determinants of U.S. farm income in both the short- and long-run over the
past two decades.