deforestation and the rule of law in a cross section of countries relationships between deforestation and population pressure income growth and insecure property rights are examined with data from 120 countries insecure property rights are hypothesized to arise from two sources government instability or inability to enforce ownership and an absence of government accountability the former source is captured by measures of general lawlessness such as guerrilla warfare revolution and frequent constitutional change the latter is proxied by variables indicating the type of government executive frequency of political purges and the existence of an elected legislature general support is indicated for the property rights hypothesis and for the effects of population growth

soil conservation as an investment in land abstract most studies on the problem of optimal soil conservation have analyzed soil conservation measures as being time limited in their effect this paper extends previous analyses of the soil conservation decision by allowing farmers to make investments in soil conservation structures such as terraces bundles and ditches it shows that the main conclusions arrived at in previous studies remain valid the long term effects of unanticipated permanent changes in prices and discount rates may go either way independent of whether conservation measures are time limited or have lasting effects on the soil base

an economic model of soil conservation by introducing soil depth and soil loss into a simple model of agricultural production this paper seeks to determine when the private path of erosion differs from the socially optimal path considering the depletion of soil only and abstracting from the environmental disruption caused by erosion the paper argues that under most institutional arrangements the social and private rates of erosion are the same the paper concludes that public policy should be directed toward reducing erosion only when it leads to significant pollution externalities

international risk cycles abstract recent work in international finance suggests that exchange rate puzzles can be accounted for if 1 aggregate uncertainty is time varying and 2 countries have heterogeneous exposures to a world aggregate shock we embed these features in a standard two country real business cycle framework and calibrate the model to equity risk premia in low and high interest rates countries unlike traditional real business cycle models our model generates volatile exchange rates a large currency forward premium excess comovement of asset prices relative to quantities and an imperfect correlation between relative consumption growth and exchange rates our model implies however that high interest rate countries have smoother quantities equity returns and interest rates than low interest rate countries contrary to the data

environmental externalities in traditional agriculture and the impact of trade liberalization the case of ghana abstract this paper provides a framework for the evaluation of trade policies that explicitly considers the effects of such policies on the environmental resources biomass in doing this we estimate the effects of biomass as a factor of agricultural production and test the hypothesis that farmers efficiently exploit biomass a resource held in common property the main findings are i biomass is an important factor of production in ghanian agriculture ii the biomass resource is exploited beyond the socially optimal level iii a deepening of trade liberalization is likely to induce further losses of biomass and deforestation and iv national income is likely to fall in response to further trade liberalization

macroeconomic disasters and the equity premium puzzle are emerging countries riskier abstract not necessarily i provide evidence that advanced countries equity premium and consumption growth differ significantly from those of emerging countries i then estimate distinct disaster risk parameters for these two country groups my bayesian analysis demonstrates that in some aspects advanced countries are more exposed to disaster risk while in others their exposure is smaller disasters are estimated to be more severe and uncertain in advanced countries but are on average less persistent advanced countries are also more likely to experience a global disaster whereas disasters in emerging countries tend to be more idiosyncratic i show that country group heterogeneity in disaster length and magnitude has the largest impact on equity premium

assessing target zone credibility mean reversion and devaluation expectations in the erm 1979 1992 abstract the paper presents estimates of devaluation expectations for six erm currencies relative to the deutsche mark for the period march 1979 april 1992 both the simplest test and the drift adjustment method are used the simplest test adjusts interest rate differentials for the maximum and minimum expected rate of depreciation within the exchange rate band the drift adjustment method adjusts interest rate differentials by the estimated expected rate of depreciation within the band the latter method gives more precise estimates especially for short horizons and allows statistical inference and hypothesis testing expected rates of devaluation have generally fallen during the period still some devaluation expectations relative to the deutsche mark remain in 1992 except for the belgian luxembourg franc and the netherlands guilder expected rates of devaluation have fluctuated more than interest rate differentials

arbitrage based tests of target zone credibility evidence from erm cross rate options this paper introduces two arbitrage based tests of target zone credibility using a new data source exchange rate mechanism cross rate options using daily option prices from september 1991 to august 1994 the authors assess the credibility of the pound mark and mark lira target zones that collapsed in september 1992 and the ongoing mark french franc target zone these tests are based on restrictions that must apply to all option prices within a credible target zone and are free from specification error and estimation error the authors also identify a minimum intensity of realignment an expression indicating the probability weighted average realignment size copyright 1996 by american economic association

agricultural development with rainforest conservation methods for seeking best bet alternatives to slash and burn with applications to brazil and indonesia abstract forests continue to fall for agricultural purposes throughout the humid tropics with immediate and potentially large consequences for climate change and biodiversity loss issues of key interest to the international community some of the actors directly responsible for forest conversion fell trees to meet food security needs and alleviate poverty issues of urgent interest to them and also to national policymakers this multiplicity of groups with differing often conflicting interests in the multifarious goods and services produced by tropical forests complicates the search for alternative agricultural activities for forest margins since these alternatives must satisfy such divergent objectives this paper sets out a conceptual framework for comparing the impacts of different land use systems and agricultural practices at the margins of tropical rainforests in terms of the concerns and objectives of two key interest groups small scale farmers seeking livelihoods at the forest margins and the international interests in the global public goods and services supplied by tropical rainforests this framework should be useful to a third key group the national and regional policymakers who must consider these and other policy objectives and then decide on courses of action the paper identifies data needs and analytical methods capable of supplying an empirical base for this conceptual framework based on quantifiable indicators it then presents preliminary results of the application of this conceptual framework in indonesia and brazil in association with a global collaborative multidisciplinary research program even using preliminary order of magnitude estimates to be replaced by more precise measurements as they become available this conceptual framework presents results in ways that allow researchers and policymakers to select clear best bets for development when they exist and to assess tradeoffs and options for complementary policy action and research efforts when they do not

population growth soil fertility and agricultural intensification abstract this paper presents a renewable resource model of soil fertility with a nonconvexity in the net benefit function in this setting recurring cycles of cropping and fallow can be the optimal soil management strategy the model is used to illuminate the boserup discussion of agricultural development in which population growth leads to agricultural intensification defined as an increase in cropping frequency previous formal models of the boserup hypothesis focus on the land labor ratio rather than cropping frequency and have not directly incorporated soil fertility dynamics these models assume a convex production technology and are not optimistic about the prospect for agricultural development without technological progress this paper explicitly models soil fertility dynamics and demonstrates that nonconvexities in the production technology are an important feature of the use of long fallow periods for soil management as population grows and the demand for food increases the importance of the nonconvexity diminishes and more frequent cropping becomes economical given a nonconvexity in the production technology it is possible though not necessary that average labor productivity increases with agricultural intensification thus it is possible to reconcile the greater labor requirement of intensive farming with an increase in average labor productivity in addition boserup argued that a larger and denser population facilitates the development of economic and social infrastructures which improve agricultural productivity

agricultural expansion and deforestation modelling the impact of population market forces and property rights abstract this paper compares four different modelling approaches to agricultural expansion and deforestation and explores the implications of assumptions about the household objectives the labour market and the property rights regime a major distinction is made between population and market based explanations many of the popular policy prescriptions are based on the population approach assuming subsistence behaviour and limited market integration within a more realistic particularly for the long term effects market approach well intentioned policies such as agricultural intensification programmes may boost deforestation many forest frontier contexts are also characterized by forest clearing giving farmers land rights deforestation becomes an investment to the farmer and a title establishment strategy land titling and credit programmes may therefore increase deforestation

environmental degradation in developing countries households and the reverse environmental kuznets curve abstract we propose an alternative explanation for the inverted u shape relationship between income and environmental degradation in developing countries production and consumption patterns of rural households are the main cause of environmental damage with a conventional household model we demonstrate that the so called environmental kuznets curve may arise when the restrictive assumption of a set of perfect markets for factors and commodities is relaxed depending on the criterion or indicator that is used to represent environmental pressure however we demonstrate that the reverse may also hold this finding highlights the importance of selecting the appropriate dependent variable in regression analyses

disaster risk and preference shifts in a new keynesian model in rbc models disaster risk shocks reproduce countercyclical risk premia but generate an increase in consumption along the recession and asset price fall through their effects on agents preferences gourio 2012 this paper offers a solution to this puzzle by developing a new keynesian model with such a small but time varying probability of disaster we show that price stickiness combined with an eis smaller than unity restores procyclical consumption and wages while preserving countercyclical risk premia in response to disaster risk shocks the mechanism then provides a rationale for discount factor first and second moment uncertainty shocks

evolution of land tenure institutions and development of agroforestry evidence from customary land areas of sumatra it is widely believed that land tenure insecurity under a customary tenure system leads to a socially inefficient resource allocation this article demonstrates that the practice of granting secure individual ownership to tree planters spurs earlier tree planting which is inefficient from the private point of view but could be efficient from the viewpoint of the global environment regression analysis based on primary data collected in sumatra indicates that an expected increase in tenure security in fact led to early tree planting it is also found that customary land tenure institutions have been evolving towards greater tenure security responding to increasing scarcity of land

financial crises development and growth a long term perspective observed over long periods the upward path of the output of most economies occasionally takes jagged steps down more often than not these events are associated with a variety of crises including systemic banking stresses exchange rate crashes a burst of inflation and a restructuring or default on sovereign debt using a large panel of countries over a long period we document that crises are typically associated with lower medium term growth that may be a direct causal channel a reverse channel or the influence of some other factors on both growth and finance but they tend to go together given that the forces for convergence of income across countries are estimated to be slow going off track around a crisis will likely have long lived consequences for relative economic development

optimal soil conservation and the reform of agricultural pricing policies abstract soil degradation is often blamed for the poor performance of agriculture in developing economies so too are policies which keep the prices of both outputs and inputs artificially low some economists have argued that pricing reforms will encourage soil depletion others say that such reforms will encourage soil conservation to evaluate these claims this paper develops models of the optimal control of soil erosion and soil fertility it is shown that the effect could go either way but that there are strong reasons for suspecting that pricing reforms will not affect soil conservation dramatically

doubts and variability a robust perspective on exotic consumption series in order for consumption based asset pricing models to reconcile data on returns with that on consumption researchers have resorted to augmenting the consumption series in exotic ways when an agent s consumption series is subject to changes in volatility we show that concerns for model misspecication can induce fears of both disasters and long run risk we appeal to this pessimistic view to explain why introducing stochastic volatility in the presence of model uncertainty helps generate a more plausible unconditional market price of risk and time variation in the conditional market price of risk our analysis is based on a parameterization derived from bayesian estimation of our stochastic volatility model using us consumption data

the economics of tropical forest land use options tropical deforestation is generally characterized as conversion of forest land to alternative uses notably agriculture this would suggest the need for rational decision making concerning the optimal allocation of tropical forest land between competing uses the following paper explores this problem by devising rules for determining optimal land use allocation between timber and agriculture at the stand and forest levels a complementary intertemporal model for optimal allocation of forest land to agricultural conversion at the forest level is also developed and used to derive a demand relationship for agricultural conversion which is then approximated through empirical estimation

the credibility of hong kong s link from the perspective of modern financial theory hong kong s linked exchange rate system lers has been in operation since 1983 during which time many other fixed exchange rate systems have succumbed to shocks and or speculative attacks this paper investigates how market participants assessed changes made to the lers by using the tools of modern finance to extract information from financial asset prices about market expectations these changes have been characterized as making the system less discretionary over time we find that decreasing the discretionary element of the lers led to an increase in credibility of the arrangement

market expectations in the uk before and after the erm crisis the british pound left the erm on 16 september 1992 after a period of turbulence uk monetary policy soon shifted to lower short interest rates and an inflation target was announced this paper uses daily option prices to estimate how the market s probability distribution of the future marks pound exchange rate and uk and german interest rates changed over the summer and autumn of 1992 the results show among other things how various policy decisions affected the market s assessment of the probabilities of realignments and lending rate cuts

rare disasters asset prices and welfare costs a representative consumer model with epstein zin weil preferences and i i d shocks including rare disasters accords with observed equity premia and risk free rates if the coefficient of relative risk aversion equals 3 4 if the intertemporal elasticity of substitution exceeds one an increase in uncertainty lowers the price dividend ratio for equity and a rise in the expected growth rate raises this ratio calibrations indicate that society would willingly reduce gdp by around 20 percent each year to eliminate rare disasters the welfare cost from usual economic fluctuations is much smaller though still important corresponding to lowering gdp by about 1 5 percent each year

economic parameters of deforestation recent debate about how timber prices affect deforestation has focused mainly on how log export bans imposed in many developing countries to protect domestic timber processing affect deforestation one side argues that the lower domestic timber prices that result from banning log exports increase deforestation by making forestry less profitable than competing land uses such as agriculture the other argues that lower timber prices reduce profits from logging so they slow down deforestation caused by logging the author argues that the conflicting views result from simplistic analysis that ignores differences between types of forest the two positions are reconciled by distinguishing between unmanaged forests for example biologically mature previously unlogged primary forests and managed forests such as forest plantations cultivated for periodic harvest this distinction allows the derivation of unambiguous comparative static results and is useful because many nontimber benefits from forests such as biodiversity conservation are associated mainly with unmanaged forests the distinction between managed and unmanaged forests leads to both unconventional and conventional results all things being equal a lower timber price results in larger areas of unmanaged forests and smaller areas of managed forests that is measures that reduce the producer price for timber for example import restrictions in timber consuming countries and export restrictions in timber producing countries are suitable as a second best policy to reduce the pressure on unmanaged forest frontiers most logging in tropical forests occurs in unmanaged forests so the claim that trade restrictions such as log export bans increase deforestation is inconsistent with profit maximizing land use a fee on land used for logging is preferable to a tax on timber output which is far more common but encourages logging waste technological interventions that increase the intensity of forestry or alternative land uses are an ambiguous instrument for the conservation of unmanaged forests if demand elasticity for outputs is high an intervention that increases the intensity of agriculture logging or other land uses increases incentive for conversion of unmanaged forests the building of roads is particularly harmful to the conservation of unmanaged forests as it increases incentives for logging and subsequent alternative land uses proper pricing of forest lands would increase land prices and lead to market driven intensification accompanied by forest protection such pricing policies would be preferable to a technological intervention that increases land use intensity with ambiguous outcomes for forest protection if unmanaged forest is converted to agriculture the effect of lowering the decisionmaker s discount rate depends on the size of timber rents from logging unmanaged forests if the standing timber has high commercial value a lower discount rate would slow conversion of unmanaged forests if the standing timber has no commercial value logging is an investment for obtaining future benefits of alternate land use a lower discount rate would stimulate this investment and increase the conversion of unmanaged forests also if unmanaged forests are converted to managed forests a lower discount rate can increase conversion since profits from managed forestry are higher with a lower discount rate

poverty alleviation and tropical forests what scope for synergies abstract this paper explores the state of the art of the two way causal links between poverty alleviation and natural tropical forests microimpacts of rising poverty can increase or slow forest loss at the macrolevel poverty also has an ambiguous effect but it is probable that higher income stimulates forest loss by raising demand for agricultural land the second question is what potential forest led development has to alleviate a country s poverty in terms of producer benefits consumer benefits and economy wide employment natural forests widely serve as safety nets for the rural poor but it proves difficult to raise producer benefits significantly urban consumer benefits from forest an important target for pro poor agricultural innovation are limited and seldom favor the poor absorption of poor unskilled labor is low in forestry which tends to be capital intensive natural forests may thus lack comparative advantage for poverty alleviation there are few win win synergies between natural forests and national poverty reduction which may help to explain why the loss of tropical forests is ongoing this may have important implications for our understanding of sustainable forest development and for the design of both conservation and poverty alleviation strategies

forest resource depletion soil dynamics and agricultural productivity in the tropics abstract a two sector dynamic model for agriculture and forestry is proposed agricultural yields are a function of the rate of deforestation the forest stock and purchased inputs we examine the impact of changes in the social discount rate net returns to agriculture and direct marginal benefits of the forest stock benefits on the optimal deforestation path under the assumption of a quadratic agricultural yield function finally steady state comparative static analysis is conducted

planning timber production with evolving prices and costs the traditional faustmann solution to the timber harvesting problem was developed for an environment in which prices costs and technology were constant recent contributions recognizing the evolution of economic institutions have developed solutions to optimal harvesting problems under a variety of more realistic assumptions nautiyal and fowler 1980 show that the socially desirable rotation in a monopolistic situation is longer than that which maximizes the monopolist s present worth but is shorter than the atomistic rotation p 213 heaps and neher 1979 derive the optimal rotation when the rate of harvest is constrained bare and waggener 1980 investigate the value of timberland when timber prices change using a traditional faustmann model murphy fortson and bethune 1977 deal with an imperfect capital market one problem not addressed by recent contributions concerns the violation of the assumption of constant price and cost functions for timber production this assumption clearly does not hold stumpage prices exhibit substantial short run fluctuations and systematic long run trends for southern pine and douglas fir two species that are potential crops for timber plantations historical evidence demonstrates that stumpage prices relative to other price have grown steadily for the period 1913 1978 the ratio of southern pine stumpage price to prices paid by farmers increased at a 4 annual rate while the same ratio for douglas fir increased at an annual rate of 5 7 1 for douglas fir and southern pine forecasts of prices and costs based on his

a note on soil depth failing markets and agricultural pricing abstract due to implementation of structural adjustment programs prices of agricultural products have increased in many developing countries from an environmental point of view it is an open question whether these price increases stimulate sustainable agriculture in the context of a simple model that includes labour intensive investments in soil conservation it is demonstrated that rising prices for agricultural outputs unambiguously increase soil conservation in the steady state with imperfect labour markets the reverse effect may occur giving rise to a conflict between agricultural reform programs and soil conservation

a model of shifting cultivation can soil conservation reduce deforestation shifting cultivators manage soil not only by adjusting soil use on already cleared lands as in continuous cultivation but also by clearing forests to obtain new fertile soils this study examines the crucial link between on farm soil conservation and deforestation in shifting cultivation by modeling forest clearing as an investment in soil for a private farmer more generally by doing so the study attempts to integrate deforestation and soil conservation models which have been separately developed in the literature our policy goal is to arrest tropical deforestation as destruction of global commons caused by land degradation in shifting cultivation while improving the well being of poor shifting cultivators our integrated approach enables joint policy analyses of deforestation and land degradation three welfare enhancing policies are considered the first is agricultural and nonagricultural subsidies affecting farm and nonfarm income opportunities the second is fiscal and tenure policies affecting discount rates our question is whether the link between forest clearing and soil fertility alters the outcomes of these two standard macroeconomic policies commonly found in the literature the third policy or program is various soil conservation measures affecting soil regeneration and erosivity on already cleared lands this article examines a very important question which has received little attention in previous theoretical works can soil conservation reduce deforestation this study confirms anti deforestation effects of the promotion of nonfarming activities a common and often emphasized finding in previous works among shifting cultivators more importantly it also demonstrates that improving various soil conservation measures not only discourages forest clearing among shifting cultivators but also tends to have greater effects on forest protection than promoting nonfarming activities contrarily agricultural price subsidy or technological progress gives rise to the opposite outcome and lowering the farmer s discount rate or improving tenure security encourages him her to clear more forests just to accumulate soil

the returns to currency speculation in emerging markets the carry trade strategy involves selling forward currencies that are at a forward premium and buying forward currencies that are at a forward discount we compare the payoffs to the carry trade applied to two different portfolios the first portfolio consists exclusively of developed country currencies the second portfolio includes the currencies of both developed countries and emerging markets our main empirical findings are as follows first including emerging market currencies in our portfolio substantially increases the sharpe ratio associated with the carry trade second bid ask spreads are two to four times larger in emerging markets than in developed countries third and most dramatically the payoffs to the carry trade for both portfolios are uncorrelated with returns to the u s stock market this abstract was borrowed from another version of this item

consumption disasters in the twentieth century an earlier study barro 2006 applied the thomas a rietz 1988 insight on rare eco nomic disasters to explain the equity premium and related asset pricing puzzles key param eters were the probability p of disaster and the distribution of disaster sizes b in the main analysis p and the distribution were assumed to be time invariant an extension to time vary ing p is in xavier gabaix 2008 because large macroeconomic disasters are rare pinning down p and the distribution from historical data requires long time series for many countries along with the assumption of rough parameter stability over time and across countries barro 2006 relied on the long term international gdp data for 35 countries from angus maddison 2003 using the definition of an economic disaster as a peak to trough fall in per capita gdp by at least 15 percent 60 disas ters were found corresponding to p 0 017 per year the average disaster size was 29 percent and the empirical size distribution was used to calibrate a model of asset pricing the underlying asset pricing theory relates to consumption c rather than gdp this distinc tion is especially important for wars for exam ple in the united kingdom during the two world wars gdp increased while c fell sharply the difference representing mostly added military spending maddison 2003 provides national accounts information only for gdp our initial idea was to add consumption c which we measure by personal consumer expenditure because of diffi culties in separating durables from nondurables in the long term data we have not assembled data on government consumption some of which may substitute for c and thereby affect asset pricing however this substitution is prob ably unimportant for military outlays which are the type of government spending that moves a lot during some disaster events maddison 2003 represents a monumental contribution for international studies using long term gdp data however although much of the information is sound close examination revealed many problems specifically maddison tends to fill in missing data with doubtful assumptions and this practice is often significant for major crises as examples maddison assumed that belgium s gdp during wwi and wwii moved with france s that mexico s gdp between 1910 and 1920 including the revolution and civil war followed a smooth trend with no crisis that gdp for colombia and peru over more than a decade moved with the average of brazil and chile and that gdp in germany for the crucial years 1944 1946 followed a linear trend there are also some mismatches between original works and published series for gdp in japan at the end of wwii and greece during wwii and its civil war given these difficulties our project expanded to estimating long term gdp for many countries the maddison informa tion was often usable but superior estimates can be constructed in many cases also results from recent major long term national accounts projects for some countries are now available including argentina brazil chile colombia greece norway spain sweden and taiwan we are dealing with long term national accounts data for 41 countries but the current study applies to the 21 for which we have thus far assembled annual data on c and gdp from before wwi to 2006 see table 1 for a list of included countries and starting years we begin discussant john campbell harvard university