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Journal Articles Journal of Development Economics Year : 2008

Deforestation and the Real Exchange Rate

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.
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Dates and versions

hal-00274384 , version 1 (18-04-2008)

Identifiers

  • HAL Id : hal-00274384 , version 1

Cite

Jean-Louis Arcand, Sylviane Guillaumont Jeanneney, Patrick Guillaumont. Deforestation and the Real Exchange Rate. Journal of Development Economics, 2008, 86 (2), pp.242-262. ⟨hal-00274384⟩
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