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Deforestation and the real exchange rate

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Author Info
Arcand, Jean-Louis
Guillaumont, Patrick
Jeanneney, Sylviane Guillaumont

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Abstract

Deforestation is a phenomenon that has largely been concentrated in the developing world. We construct a theoretical model of deforestation that focuses on the factors affecting the incentives to transform forested land into agricultural land. We show that: (i) lower discount rates and stronger institutions decrease deforestation; (ii) a depreciation in the real exchange rate increases deforestation in developing countries whereas the opposite obtains in developed countries; (iii) paradoxically, better institutions may exacerbate the deleterious impact of a depreciation in developing countries. These hypotheses are tested on an annual sample of 101 countries over the 1961-1988 period, and are not rejected by the data. Our results suggest that short-term macroeconomic policy, institutional factors, and the interaction between the two, are potentially important determinants of environmental outcomes.

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Publisher Info
Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 86 (2008)
Issue (Month): 2 (June)
Pages: 242-262
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Handle: RePEc:eee:deveco:v:86:y:2008:i:2:p:242-262

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Farzin, Y Hossein, 1984. "The Effect of the Discount Rate on Depletion of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 92(5), pages 841-51, October. [Downloadable!] (restricted)
  2. Cropper, Maureen & Griffiths, Charles, 1994. "The Interaction of Population Growth and Environmental Quality," American Economic Review, American Economic Association, vol. 84(2), pages 250-54, May. [Downloadable!] (restricted)
  3. Angelsen, Arild & Kaimowitz, David, 1999. "Rethinking the Causes of Deforestation: Lessons from Economic Models," World Bank Research Observer, Oxford University Press, vol. 14(1), pages 73-98, February. [Downloadable!]
  4. Henning Bohn & Robert T. Deacon, 2000. "Ownership Risk, Investment, and the Use of Natural Resources," American Economic Review, American Economic Association, vol. 90(3), pages 526-549, June. [Downloadable!] (restricted)
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  5. Bhattarai, Madhusudan & Hammig, Michael, 2001. "Institutions and the Environmental Kuznets Curve for Deforestation: A Crosscountry Analysis for Latin America, Africa and Asia," World Development, Elsevier, vol. 29(6), pages 995-1010, June. [Downloadable!] (restricted)
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  1. Laetitia Duval & François-Charles Wolff, 2009. "L'effet des transferts migratoires sur la déforestation dans les pays en développement," Working Papers hal-00421222_v1, HAL. [Downloadable!]
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