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Deforestation and Seigniorage in Developing Countries: A Tradeoff?

Listed author(s):
  • Jean-Louis Combes

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS - Université d'Auvergne - Clermont-Ferrand I)

  • Pascale Combes Motel

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS - Université d'Auvergne - Clermont-Ferrand I)

  • Alexandru Minea

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS - Université d'Auvergne - Clermont-Ferrand I)

  • Patrick Villieu

    (LEO, University of Orléans - LEO, University of Orléans)

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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Date of creation: 08 Jun 2015
Handle: RePEc:hal:wpaper:halshs-00939273
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