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Deforestation and Seigniorage in Developing Countries: A Tradeoff?

  • 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

Most of countries covered by natural forests are developing countries, with limited ability to levy taxes and restrained access to international credit markets; consequently, they are amenable to draw heavily on two sources of government financing, namely seigniorage and deforestation revenues. First, we develop a theoretical model emphasizing a substitution effect between seigniorage and deforestation revenues. Second, a panel-data econometric analysis over the 1990-2010 period confirms our findings. Consequently, a tighter monetary policy hastens deforestation. Third, we extend the theoretical model and show that international transfers dedicated to forest protection can upturn the positive link between tighter monetary policies and deforestation, and then discuss the relevance of this finding with respect to recent institutional arrangements.

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Paper provided by CERDI in its series Working Papers with number 201322.

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Length: 31
Date of creation: 2013
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Publication status: Published in , 2009, pages
Handle: RePEc:cdi:wpaper:1492
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