Deforestation and the Real Exchange Rate

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

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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) depreciations in the real exchange rate increase deforestation in developing countries whereas the opposite obtains in developed countries; (iii) paradoxically, better institutions may exacerbate the deleterious impact of depreciations 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.

Keywords: deforestation; real effective exchange rate; institutions (search for similar items in EconPapers)
Date: 2011-02-28
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00570477
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Related works:
Journal Article: Deforestation and the real exchange rate (2008)
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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