Equilibrium Land Prices of Japanese Prefectures: A Panel Cointegration Analysis

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.