Testing a present value model of forest land

Abstract

The empirical validity of a simple present value model describing forest land prices according to economic fundamentals is examined. The implications of the model are derived and tested by use of time series econometric methods on Danish rent and price data in the period 1911–92. A necessary condition of the model is rejected by the data, probably due to an under parameterization of the model. An extension of the model, including the omitted variable, is suggested and discussed theoretically.