Deforestation and the real exchange rate

Jean-Louis Arcand, Patrick Guillaumont () and Sylviane Guillaumont Jeanneney

Journal of Development Economics, 2008, vol. 86, issue 2, 242-262

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.

Date: 2008
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Related works:
Working Paper: Deforestation and the Real Exchange Rate (2011)
Working Paper: Deforestation and the Real Exchange Rate (2008)
Working Paper: Deforestation and the Real Exchange Rate (2005)
Working Paper: Deforestation and the Real Exchange Rate (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:86:y:2008:i:2:p:242-262

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