Charles Moss • Macroeconomics and Microeconomics of Agricultural Finance

Purpose: This course extends the traditional managerial analysis of agricultural finance presented in introductory and intermediate classes in agricultural finance. The course starts with the neoclassical economic model of the capital market then extends this formulation to include principal agent problems, arbitrage models of the capital market, and macroeconomic models of money and banking. (Syllabus).

Textbooks: This course draws on a wide array of published material. As such, we will not use one textbook. I will put a copy of each book on reserve and keep a copy of each text in my office to be signed out for 12 hours. These textbooks include

Hayek, F.A. The Pure Theory of Capital. The Ludwig von Mises Institute.
Hirshleifer, J. 1970. Investment, Interest and Capital. Prentice-Hall.
Ingersoll, J.E., Jr. 1987. Theory of Financial Decision Making. Rowman & Littlefield
Moss, Charles B. 2010. Risk, Uncertainty, and the Agricultural Firm. World Scientific Publishers.
Moss, Charles B. 2013. Agricultural Finance. Routledge.
Williamson, Oliver E. 1985 The Economic Institutions of Capitalism. The Free Press.

Outline

Course Overview Overheads
Capital Markets
- Neoclassical Theory of the Capital Market
  - Video - Commanding Heights - Episode 1
    - Online Guide
    - Yergin, D. and J. Stanislaw. 2002. The Commanding Heights: The Battle for the World Economy Kindle .
  - Introduction to Financial Economics pdf Notes , Overheads , Audio mp3 , Audio WMA.
    - Hirshleifer Investment, Interest, and Capital Chapter 1.
    - Moss Agricultural Finance Chapters 1 & 2.
  - Neoclassical Market Model for Capital I pdf Notes , Overheads , Audio (mp3) , Audio WMA.
    - Hirshleifer, J. 1958. On the Theory of Optimal Investment Decision. Journal of Political Economy 66(4), 329-352. JSTOR
    - Numerical derivation of capital demand Mathematica Notebook .
  - Neoclassical Market Model for Capital II pdf Notes , Overheads , Audio (mp3).
    - Complete capital market Mathematica Notebook .
    - Kansas City Federal Reserve Bank Survey of Tenth District Agricultural Credit Conditions
  - Video - Commanding Heights - Episode 2
- Equity, Ownership, and Entrepreneurism
  - Debt and Equity - A First Pass pdf Notes , Overheads , Audio (mp3), Audio (WMA).
  - Understanding Firms - An Introduction to Agency Theory pdf Notes , Overheads Audio (mp3) , Audio (WMA).
    - Jensen, M.C. and Meckling, W.H. 1976. Theory of the Firm: Management Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics 3, 305-360.
    - Moss Agricultural Finance Appendix A.
    - Corporations and Private Propery Journal of Law and Economics Special Issue JSTOR .
  - Agency and Investment in the Firm Overheads , pdf Notes , Audio (mp3), Audio (WMA).
  - Coase, Transaction Costs, and the Boundaries of the Firm Overheads , pdf Notes , Audio (mp3) , Audio (WMA) .
  - Grossman and Hart — Vertical and Lateral Integration [Part I] Overheads , pdf Notes , Audio (mp3) , Audio (WMA) .
    - Grossman, S. and O. Hart. 1986. The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration. Journal of Political Economy 94, 691-719. JSTOR .
  - Grossman and Hart — Vertical and Lateral Integration [Part II] Overheads , pdf Notes , Audio (mp3) , Audio (WMA) .
  - Williamson - Chapter I Overheads , pdf Notes , Audio (mp3), Audio (WMA).
    - Klein, B., R.G. Crawford, and A.A. Alchain. 1978. Vertical Integration, Appropriable Rents, and the Competitive Contracting Process. Journal of Land and Economics 21(2), 297-326. JSTOR .
    - Williamson The Economic Institutions of Capitalism Chapters 1.
    - Williamson, O.E. 1979. Transaction-Cost Economics. Journal of Law and Economics 22, 233-261. JSTOR .
  - Williamson - Chapters 2 & 3 Overheads , pdf Notes , Audio (mp3) , Audio (WMA).
  - Williamson - Chapter 4 Overheads , pdf Notes , Audio (mp3) , Audio (WMA) .
  - Williamson - Chapter 6: Limits to Integration Overheads , pdf Notes , Audio (mp3) , Audio (WMA) .
  - Williamson - Chapter 7: Credible Commitments - Unilateral Applications Overheads , pdf Notes , Audio (mp3) , Audio (WMA) .
  - Presentation on Marginal Interest Rates Overheads , Audio (mp3) , Audio (WMA) .
    - Federal Reserve Board Open Market Committee Minutes .
  - Williamson - Chapter 8 & 11 Overheads , Audio (mp3) , Audio (WMA) .
  - The Nature of the Farm Overheads , pdf Notes , Audio (mp3) , Audio (WMA) .
    - Allen, D.W. and D. Lueck. 1998. The Nature of the Farm. Journal of Law and Economics 41(2), 343-386. JSTOR .
  - Knowing the Value of Coffee Overheads , Paper , Audio (mp3), Audio (WMA) .
- Debt and Equity Market
  - Farm Level Debt Choice — The Risk Balancing Model Overheads , pdf Notes, Audio (mp3) , Audio (WMA) .
    - Collins, R.A. 1982. Expected Utility, Debt-Equity Structure, and Risk Balancing. American Journal of Agricultural Economics 65, 627-629. JSTOR .
    - Gariel, S.C. and C.B. Baker. 1980. Concepts of Business and Financial Risk. American Journal of Agricultural Economics 62(3), 560-64. JSTOR
  - Policy Implications of Debt Choice Overheads , pdf Notes , Audio (mp3), Audio (WMA).
    - Featherstone, A.M., C.B. Moss, T.G. Baker, and P.V. Preckel. 1988. The Theoretical Effects of Farm Policies on Optimal Leverage and the Probability of Equity Loss. American Journal of Agricultural Economics 70(3), 572-579. JSTOR .
    - Moss, C.B., S.A. Ford, and W.G. Boggess. 1989. Capital Gains, Optimal Leverage, and the Probability of Equity Loss: A Theoretical Model. Agricultural Finance Review 49, 127-34. pdf .
    - Ramirez, O.A., C.B. Moss, and W.G. Boggess. 1997. A Stochastic Optimal Control Formulation of the Consumption/Debt Decision. Agricultural Finance Review 57, 29-38. pdf .
  - Estimation of Endogenous Debt Models Overheads , pdf Notes , Audio (mp3), Audio (WMA).
    - Ahrendson, B.L., R.N. Collender, and B.L. Dixon. 1994. An Empirical Analysis of Optimal Farm Capital Structure Decisions. Agricultural Finance Review 54, 108-119.
    - Jensen, F.E. and L.N. Langemeier. 1996. Optimal Leverage with Risk Aversion: Empirical Evidence. Agricultural Finance Review 56, 85-97.
    - Moss, C.B., J.S. Shonkwiler, and S.A. Ford. 1990. A Risk Endogenous Model of Aggregate Agricultural Debt. Agricultural Finance Review 50, 73-79.
    - Moss, C.B. and A.K. Mishra. 2013. Debt-Equity Structure and Risk Balancing by Farm Businesses. Food and Resource Economics Department, University of Florida, Working Paper.
    - Moss, C.B., A.M. Misrha, and H. Uematsu. 2012. Capital Structure in Modern American Agriculture: Evidence from a National Survey. Selected Paper Presented at the American Agricultural Economics Association Meeting, Seattle Washington.
    - Collins, R.A. and L. S. Karp. 1993. Lifetime Leverage Choice for Proprietary Farmers in a Dynamic Stochastic Environment. Journal of Agricultural and Resource Economics 18(2), 225-238. AgeconSearch .
  - Credit Market Imperfections Overheads , pdf Notes, Audio (mp3), Audio (WMA).
    - Stiglitz, J.E. and A. Weiss. 1981. Credit Rationing in Markets with Imperfect Information. American Economic Review 71, 393-410. JSTOR
  - Contracts and Asymmetric Information I Overheads , pdf Notes, Audio (mp3), Audio (WMA).
    - Darrough, M.N. and N.M. Stoughton. 1986. Moral Hazard and Adverse Selection: The Question of Financial Structure. Journal of Finance 41(2), 501-513. JSTOR .
    - Innes, R.D. 1990. Limited Liability and Incentive Contracting with Ex-Ante Action Choices. Journal of Economic Theory 52(1), 45-67. ScienceDirect .
  - Asymmetric Information and Agricultural Debt Overheads , pdf Notes, Audio (mp3), Audio (WMA).
    - Innes, R.D. 1990. Imperfect Information and the Theory of Government Intervention in Farm Credit Markets. American Journal of Agricultural Economics 72(3), 761-768. JSTOR .
    - Innes, R. 1991. Investment and Government Intervention in Credit Markets when there is Asymmetric Information. Journal of Public Economics 46, 347-381. Sciencedirect
    - Innes, R. 1993. Financial Contracting under Risk Neutrality, Limited Liability and Ex Ante Asymmetric Information. Economica 60(237), 27-40. JSTOR
    - Innes, R. 2002. Market Failures and Second-Best Analysis with a Focus on Nutrition, Credit, and Incomplete Markets. Handbook on Agricultural Economics. Elsevier Science, pp. 1828-1892. Science Direct
Equilibrium Models in Capital Markets
- Value of Farmland
  - Valuing Farmland — Three Stylized Facts Overheads , Paper , Audio (mp3), Audio (WMA).
    - Moss, C.B. 1997. Returns, Interest Rates, and Inflation: How They Explain Changes in Farmland Values. American Journal of Agricultural Economics 79, 1311-1318. JSTOR
  - Effect of Farmland Value Fluctuations on the Agricultural Balance Sheet pdf Overheads, Audio (mp3) , Audio (WMA), PowerPoint Overheads
    - Erickson, K., A.K. Mishra, and C.B. Moss. 2003. Cash Rents, Imputed Returns, and the Valuation of Farmland Revisited. Government Policy and Farmland Markets. Iowa State University Press, pp. 223-235.
    - Featherstone, A.M. and C.B. Moss. 2003. Capital Markets, Land Values, and Boom-Bust Cycles. Government Policy and Farmland Markets. Iowa State University Press, pp. 159-178.
    - Mishra, A.K., C.B. Moss, and K.W. Erickson. 2008. The Role of Credit Constraints and Government Subsidies in Farmland VAluations in the U.S.: An Options Pricing Model Approach. Empirical Economics 34(2), 285-297. Springer Link.
    - Moss, C.B. and A. Katchova. 2005. Farmland Valuation and Asset Performance. Agricultural Finance Review 65, 119-130. Online Access .
    - Moss, C.B. and A. Schmitz. 2006. Farmland Markets, Boom/Bust Cycles, and Farm Size. Agriculture in the Face of Changin Market, Institutions and Policies: Challenges and Strategies, 80-102. pdf .
- Equilibrium and Arbitrage
  - Ratio Analysis and Asset Price Equilibrium
    - Moss Agricultural Finance - Chapter 2
    - Mishra, A.K., C.B. Moss, and K.W. Erickson. 2009. Regional Differences in Agricultural Profitability, Government Payments, and Farmland Values: Implications of DuPont Expansion. Agricultural Finance Review 69, 79-66. Online Access
  - Models of Risk and Capital Markets
    - Barry, P.J. 1980. Capital Asset Pricing and Farm Real Estate. American Journal of Agricultural Economics 62, 549-553. JSTOR
    - Ingersoll Theory of Financial Decision Making - Chapters 2, 7, 8, 9.
    - Lecture material from FIN 6446 Website .
    - Lecture material on Market Models from AEB 7182 Website .
    - Moss Risk, Uncertainty, and the Agricultural Firm - Chapter 9.
Macroeconomic and Capital Markets
- Agricultural Money, Credit and Banking.
  - An Overview of Agricultural Banking and Institutions.
  - Austrian Models of Capital Markets
    - Hayek The Pure Theory of Capital Chapters 1, 2, and 3.
- Advanced Models from Monetary Economics
  - Diamond, D.W. and P.H. Dybvig. 1983. Bank Runs, Deposit Insurance, and Liquidity. Journal of Political Economy 91, 401-419.
  - Townsend, R.M. 1980 Models of Money with Spatially Separated Agents. Models of Monetary Economics. Federal Reserve Bank of Minneapolis.
  - Townsend, R.M. 1979. Optimal Contracts and Competitive Markets with Costly State Verification. Journal of Economic Theory 21, 265-293.
  - Wallace, N. 1980. The Overlapping Generations Model of Fiat Money. Models of Monetary Economics. Federal Reserve Bank of Minneapolis, pp. 49-82.

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