Disorganization and financial collapse
AbstractRecently, Blanchard and Kremer (BK) argued that disorganization has led to the output decline in the former Soviet Union. In this paper we introduce liquidity and credit constraints into the BK model and show how these problems can alleviate the hold-up problem. We argue further that barter creates a hostage which allows to deal with disorganization when credit enforcement is prohibitively costly. The theory helps to explain how the three observed phenomena of output decline, inter-firms arrears and barter in transition economies are connected. Based on a survey of 165 barter deals in the Ukraine in 1997, we reproduce the BK result with firm level and deal specific data and we show that in addition to the input shortage the financial shortage and barter have each an important effect on output growth.
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Bibliographic InfoArticle provided by Elsevier in its journal European Economic Review.
Volume (Year): 49 (2005)
Issue (Month): 2 (February)
Contact details of provider:
Web page: http://www.elsevier.com/locate/eer
Other versions of this item:
- Marin, Dalia & Schnitzer, Monika, 1999. "Disorganization and Financial Collapse," CEPR Discussion Papers 2245, C.E.P.R. Discussion Papers.
- Dalia Marin & Monika Schnitzer, 2000. "Disorganization and Financial Collapse," CESifo Working Paper Series 339, CESifo Group Munich.
- Dalia Marin & Monika Schnitzer, 1999. "Disorganization and Financial Collapse," William Davidson Institute Working Papers Series 285, William Davidson Institute at the University of Michigan.
- D2 - Microeconomics - - Production and Organizations
- G3 - Financial Economics - - Corporate Finance and Governance
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
- P3 - Economic Systems - - Socialist Institutions and Their Transitions
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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50, European Bank for Reconstruction and Development, Office of the Chief Economist.
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- Dalia Marin, 2002. "Trust versus illusion: What is driving demonetization in the former Soviet Union?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 10(1), pages 173-200, March.
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