IDEAS home Printed from https://ideas.repec.org/p/cdi/wpaper/461.html
   My bibliography  Save this paper

Deforestation and the Real Exchange Rate

Author

Listed:
  • Jean-Louis ARCAND
  • Patrick GUILLAUMONT

    (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

  • Sylviane GUILLAUMONT JEANNENEY

    (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

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 (associated with higher income levels), stronger institutions, and increases in the relative price of timber 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 exacerbate the deleterious impact of depreciations in developing countries. These hypotheses are tested on an annual sample of 122 countries over the 1963-1994 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.

Suggested Citation

  • Jean-Louis ARCAND & Patrick GUILLAUMONT & Sylviane GUILLAUMONT JEANNENEY, 2003. "Deforestation and the Real Exchange Rate," Working Papers 200332, CERDI.
    • Handle: RePEc:cdi:wpaper:461
    as

    Download full text from publisher

    File URL: https://publi.cerdi.org/ed/2003/2003.32.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Rock, Michael T., 1996. "The stork, the plow, rural social structure and tropical deforestation in poor countries?," Ecological Economics, Elsevier, vol. 18(2), pages 113-131, August.
    2. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    3. Christine Sauer & Alok K. Bohara, 2001. "Exchange Rate Volatility and Exports: Regional Differences between Developing and Industrialized Countries," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 133-152, February.
    4. Farzin, Y Hossein, 1984. "The Effect of the Discount Rate on Depletion of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 92(5), pages 841-851, October.
    5. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 321-340.
    6. Stephen R. Bond, 2002. "Dynamic panel data models: a guide to micro data methods and practice," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 1(2), pages 141-162, August.
    7. Robert T. Deacon & Henning Bohn, 2000. "Ownership Risk, Investment, and the Use of Natural Resources," American Economic Review, American Economic Association, vol. 90(3), pages 526-549, June.
    8. Panayotou T., 1993. "Empirical tests and policy analysis of environmental degradation at different stages of economic development," ILO Working Papers 992927783402676, International Labour Organization.
    9. Stephen Bond & Céline Nauges & Frank Windmeijer, 2002. "Unit Roots and Identification in Autoregressive Panel Data Models: A Comparison of Alternative Tests," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C5-4, International Conferences on Panel Data.
    10. Bhattarai, Madhusudan & Hammig, Michael, 2001. "Institutions and the Environmental Kuznets Curve for Deforestation: A Crosscountry Analysis for Latin America, Africa and Asia," World Development, Elsevier, vol. 29(6), pages 995-1010, June.
    11. Stephen Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    12. Arellano, Manuel, 2003. "Panel Data Econometrics," OUP Catalogue, Oxford University Press, number 9780199245291.
    13. repec:bla:reviec:v:9:y:2001:i:1:p:133-52 is not listed on IDEAS
    14. Rudel, Tom & Roper, Jill, 1997. "The paths to rain forest destruction: Crossnational patterns of tropical deforestation, 1975-1990," World Development, Elsevier, vol. 25(1), pages 53-65, January.
    15. Angelsen, Arild & Kaimowitz, David, 1999. "Rethinking the Causes of Deforestation: Lessons from Economic Models," The World Bank Research Observer, World Bank, vol. 14(1), pages 73-98, February.
    16. repec:ilo:ilowps:292778 is not listed on IDEAS
    17. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    18. Perz, Stephen G., 2004. "Are Agricultural Production and Forest Conservation Compatible? Agricultural Diversity, Agricultural Incomes and Primary Forest Cover Among Small Farm Colonists in the Amazon," World Development, Elsevier, vol. 32(6), pages 957-977, June.
    19. Bhattarai, Madhusudan & Hammig, Michael, 2004. "Governance, economic policy, and the environmental Kuznets curve for natural tropical forests," Environment and Development Economics, Cambridge University Press, vol. 9(3), pages 367-382, July.
    20. Cropper, Maureen & Griffiths, Charles, 1994. "The Interaction of Population Growth and Environmental Quality," American Economic Review, American Economic Association, vol. 84(2), pages 250-254, May.
    21. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    22. Andrew D. Foster & Mark R. Rosenzweig, 2003. "Economic Growth and the Rise of Forests," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(2), pages 601-637.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ajanaku, B.A. & Collins, A.R., 2021. "Economic growth and deforestation in African countries: Is the environmental Kuznets curve hypothesis applicable?," Forest Policy and Economics, Elsevier, vol. 129(C).
    2. Combes, J.-L. & Combes Motel, P. & Minea, A. & Villieu, P., 2015. "Deforestation and seigniorage in developing countries: A tradeoff?," Ecological Economics, Elsevier, vol. 116(C), pages 220-230.
    3. Jean-Louis Combes & Pascale Combes Motel & Philippe Delacote, 2014. "Public expenses, credit and natural capital: Substitution or complementarity?," Working Papers halshs-00979191, HAL.
    4. Angelica Gonzalez, 2007. "Angelica Gonzalez," Edinburgh School of Economics Discussion Paper Series 168, Edinburgh School of Economics, University of Edinburgh.
    5. Angelica Gonzalez, 2007. "Empirical Likelihood: Improved Inference within Dynamic Panel Data Models," Edinburgh School of Economics Discussion Paper Series 154, Edinburgh School of Economics, University of Edinburgh.
    6. Leblois, Antoine & Damette, Olivier & Wolfersberger, Julien, 2017. "What has Driven Deforestation in Developing Countries Since the 2000s? Evidence from New Remote-Sensing Data," World Development, Elsevier, vol. 92(C), pages 82-102.
    7. Huang, Yongfu, 2010. "Political Institutions and Financial Development: An Empirical Study," World Development, Elsevier, vol. 38(12), pages 1667-1677, December.
    8. Yongfu Huang, 2005. "Will political liberalisation bring about financial development?," Bristol Economics Discussion Papers 05/578, School of Economics, University of Bristol, UK.
    9. Abonazel, Mohamed R., 2016. "Bias Correction Methods for Dynamic Panel Data Models with Fixed Effects," MPRA Paper 70628, University Library of Munich, Germany.
    10. Davide Consoli & Francesco Vona & Francesco Rentocchini, 2016. "That was then, this is now: skills and routinization in the 2000s," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 25(5), pages 847-866.
    11. Monica Schuster & Miet Maertens, 2013. "8 Private Food Standards and Firm-Level Trade Effects: A Dynamic Analysis of the Peruvian Asparagus Export Sector," Frontiers of Economics and Globalization, in: Nontariff Measures with Market Imperfections: Trade and Welfare Implications, pages 187-213, Emerald Group Publishing Limited.
    12. repec:hal:spmain:info:hdl:2441/2ajduu0gqt9ho8h2tavbin6ops is not listed on IDEAS
    13. Changjun Zheng & Mohammed Mizanur Rahman & Munni Begum & Badar Nadeem Ashraf, 2017. "Capital Regulation, the Cost of Financial Intermediation and Bank Profitability: Evidence from Bangladesh," JRFM, MDPI, vol. 10(2), pages 1-24, April.
    14. Bebonchu Atems & Grayden Shand, 2018. "An empirical analysis of the relationship between entrepreneurship and income inequality," Small Business Economics, Springer, vol. 51(4), pages 905-922, December.
    15. Medina-Durango, Carlos Alberto & Posso Suárez, Christian Manuel & Tamayo, Jorge A. & Monsalve, Emma, 2012. "Dinámica de la demanda laboral en la industria manufacturera colombiana 1993-2009 : una estimación panel VAR," Chapters, in: Arango-Thomas, Luis Eduardo & Hamann-Salcedo, Franz Alonso (ed.), El mercado de trabajo en Colombia : hechos, tendencias e instituciones, chapter 7, pages 289-330, Banco de la Republica de Colombia.
    16. Zhaoxia Xu, 2007. "Do Firms Adjust Toward a Target Leverage Level?," Staff Working Papers 07-50, Bank of Canada.
    17. Liyong Lu & Jay Pan, 2021. "Does hospital competition lead to medical equipment expansion? Evidence on the medical arms race," Health Care Management Science, Springer, vol. 24(3), pages 582-596, September.
    18. Johanna Vogel, 2012. "Agglomeration and Growth: Evidence from the Regions of Central and Eastern Europe," ERSA conference papers ersa12p1089, European Regional Science Association.
    19. Christian Merkl & Stephanie Stolz, 2009. "Banks' regulatory buffers, liquidity networks and monetary policy transmission," Applied Economics, Taylor & Francis Journals, vol. 41(16), pages 2013-2024.
    20. Combes, Jean-Louis & Delacote, Philippe & Combes Motel, Pascale & Yogo, Thierry Urbain, 2018. "Public spending, credit and natural capital: Does access to capital foster deforestation?," Economic Modelling, Elsevier, vol. 73(C), pages 306-316.
    21. Juan Federico & Joan-Lluis Capelleras, 2015. "The heterogeneous dynamics between growth and profits: the case of young firms," Small Business Economics, Springer, vol. 44(2), pages 231-253, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdi:wpaper:461. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Vincent Mazenod (email available below). General contact details of provider: https://edirc.repec.org/data/ceauvfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.