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Deforestation and Seigniorage in Developing Countries:Better Environment or Lower Inflation?

Author

Listed:
  • Jean-Louis COMBES

    () (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

  • Pascale COMBES MOTEL

    () (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

  • Alexandru MINEA

    () (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

  • Patrick VILLIEU

Abstract

The forest covers an important share of land area in many developing countries and represents an important source of revenue for governments. The other major contribution to government revenues in developing countries comes from printing money, namely the seigniorage. Using a simple theoretical model, we show that tighter monetary policies exert a positive effect on deforestation rates. Consequently, there exists a substitution effect between deforestation rates and seigniorage. Empirical evidence for a panel of developing countries seems to support our theoretical conclusion. This finding sheds some new light on policies that limit seigniorage revenues, as for example IMF’s low-inflation recommendations.

Suggested Citation

  • Jean-Louis COMBES & Pascale COMBES MOTEL & Alexandru MINEA & Patrick VILLIEU, 2009. "Deforestation and Seigniorage in Developing Countries:Better Environment or Lower Inflation?," Working Papers 200903, CERDI.
  • Handle: RePEc:cdi:wpaper:1025
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    Keywords

    Deforestation; Seigniorage; Inflation; Developing countries; Panel Data Analysis;

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