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Equilibrium Land Prices of Japanese Prefectures: A Panel Cointegration Analysis *1

July 2004
Takashi Nagahata *2
Yumi Saita *3
Toshitaka Sekine *4
Towa Tachibana *5

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  • *1 We are grateful to Yoichi Matsubayashi, Etsuro Shioji, Ryuzo Miyao, Takako Idee, Hiroshi Fujiki, Shigenori Shiratsuka, Yutaka Soejima, and many staff members at the Research and Statistics Department of the Bank of Japan for helpful comments. This is a substantially revised version of our previous working paper circulated in Japanese (BOJ Working Paper, No. 04-J-7).
  • *2 London School of Economics and Research and Statistics Department, Bank of Japan
  • *3 Research and Statistics Department, Bank of Japan, e-mail: yumi.saita@boj.or.jp
  • *4 Research and Statistics Department, Bank of Japan, e-mail: toshitaka.sekine@boj.or.jp
  • *5 Graduate School of International Cooperation Studies, Kobe University, e-mail: ttachi@kobe-u.ac.jp

Abstract

Based on newly constructed prefectural land price data, we estimate long-run equilibrium relationships using a panel cointegration analysis, and then estimate an error-correction model (ECM) for land prices. The panel cointegration analysis reveals that the PVR cum price expectation can be regarded as a long-run equilibrium relationship. The ECM finds that deviations from the long-run equilibrium and non-performing loans in particular have sizable effects on land prices. Moreover, recent regional discrepancies in land prices are closely related to deviations from the long-run equilibrium.

JEL Classification Number:
G12, C23

Keywords:
land price, present value relation, panel cointegration