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The Economic Institution of International Barter

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  • Marin, Dalia
  • Schnitzer, Monika

Abstract

Starting with the international debt crisis in the early 1980s, the volume of international barter trade increased substantially. This paper examines how barter can help highly indebted countries to finance imports if they cannot use standard credit arrangements. We argue that payment in goods is easier to enforce than payment in money. But there is also a risk that the debtor pays with inferior quality products. We rank goods with respect to these incentive properties and derive the economic institution of commodity money which explains the trade pattern in barter. The predictions of our model are consistent with data on actual barter contracts.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1658.

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Date of creation: Jun 1997
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Handle: RePEc:cpr:ceprdp:1658

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Keywords: Commodity Money; Creditworthiness; Economic Incentives and International Trade; Sovereign Debt;

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References

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  1. Stewart C. Myers & Raghuram G. Rajan, 1998. "The Paradox of Liquidity," CRSP working papers 339, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  2. Bulow, J. & Rogoff, K., 1988. "Sovereign Debt: Is To Forgive To Forget?," Working papers 8813, Wisconsin Madison - Social Systems.
  3. Caves, R.E. & Marin, D., 1992. "Countertrade Transactions: Theory and Evidence," Harvard Institute of Economic Research Working Papers 1599, Harvard - Institute of Economic Research.
  4. Abhijit V. Banerjee & Eric S. Maskin, 1996. "A Walrasian Theory of Money," Harvard Institute of Economic Research Working Papers 1753, Harvard - Institute of Economic Research.
  5. Marin, Dalia & Schnitzer, Monika, 1995. "Creating Creditworthiness through Reciprocal Trade," CEPR Discussion Papers 1185, C.E.P.R. Discussion Papers.
  6. Amann, Erwin & Marin, Dalia, 1994. "Risk-Sharing in International Trade," Munich Reprints in Economics 3110, University of Munich, Department of Economics.
  7. Greif, Avner, 1992. "Institutions and International Trade: Lessons from the Commercial Revolution," American Economic Review, American Economic Association, vol. 82(2), pages 128-33, May.
  8. Marin, Dalia & Schnitzer, Monika, 1995. "Tying Trade Flows: A Theory of Countertrade with Evidence," American Economic Review, American Economic Association, vol. 85(5), pages 1047-64, December.
  9. Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March.
  10. Hart, Oliver & Moore, John, 1995. "Debt and Seniority: An Analysis of the Role of Hard Claims in Constraining Management," American Economic Review, American Economic Association, vol. 85(3), pages 567-85, June.
  11. Amann, Erwin & Marin, Dalia, 1994. "Risk-Sharing in International Trade: An Analysis of Countertrade," Journal of Industrial Economics, Wiley Blackwell, vol. 42(1), pages 63-77, March.
  12. Gooptu, Sudarshan & Martinez Peria, Maria Soledad, 1992. "Factors that affect short-term commercial bank lending to developing countries," Policy Research Working Paper Series 886, The World Bank.
  13. Eaton, Jonathan & Gersovitz, Mark, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Wiley Blackwell, vol. 48(2), pages 289-309, April.
  14. Hennart, Jean-Francois & Anderson, Erin, 1993. "Countertrade and the Minimization of Transaction Costs: An Empirical Examination," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(2), pages 290-313, October.
  15. Prendergast, Canice & Stole, Lars, 2001. "The non-monetary nature of gifts," European Economic Review, Elsevier, vol. 45(10), pages 1793-1810, December.
  16. Kletzer, K.M. & Wright, B.D., 1990. "Sovereign Debt Renegotiation In A Consumption-Smoothing Model," Papers 610, Yale - Economic Growth Center.
  17. Banerjee, Abhijit V & Maskin, Eric S, 1996. "A Walrasian Theory of Money and Barter," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 955-1005, November.
  18. Casella, Alessandra & Rauch, James E, 1998. "Overcoming Informational Barriers to International Resource Allocation: Prices and Group Ties," CEPR Discussion Papers 1978, C.E.P.R. Discussion Papers.
  19. Marin, Dalia, 1990. "Tying in International Trade," Munich Reprints in Economics 3114, University of Munich, Department of Economics.
  20. Eaton, Jonathan, 1990. "Debt Relief and the International Enforcement of Loan Contracts," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 43-56, Winter.
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Citations

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Cited by:
  1. Marin, Dalia & Schnitzer, Monika, 2005. "Disorganization and financial collapse," Munich Reprints in Economics 19258, University of Munich, Department of Economics.
  2. Marin, Dalia & Schnitzer, Monika, 1998. "Economic incentives and international trade," Munich Reprints in Economics 19262, University of Munich, Department of Economics.
  3. Maria del Carmen Garcia-Alonso & Paul Levine & Antonia Morga, 2004. "Export Credit Gurantees, Moral Hazard and Exports Quality," Studies in Economics 0402, Department of Economics, University of Kent.
  4. Dassiou Xeni & Choi Chong Ju & Maldoom Dan, 2004. "Trade and Linked Exchange; Price Discrimination Through Transaction Bundling," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 4(1), pages 1-17, May.
  5. Barbara, CRESTI, 2003. "U.S. Domestic Barter : an Empirical Investigation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2003005, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  6. Jinjarak, Yothin, 2007. "Foreign direct investment and macroeconomic risk," Journal of Comparative Economics, Elsevier, vol. 35(3), pages 509-519, September.
  7. Jose Noguera & Susan Linz, 2003. "A Theoretical Model of Barter in Russia," CERGE-EI Working Papers wp207, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  8. Oana Răvaș, 2011. "The Utility of the Barter Agreement in International Commercial Trade," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 11(1), pages 223-234.
  9. Ellingsen, Tore, 1998. "Payments in Kind," Working Paper Series in Economics and Finance 244, Stockholm School of Economics, revised 10 Feb 2000.
  10. Barbara Cresti, 2005. "US domestic barter: an empirical investigation," Applied Economics, Taylor & Francis Journals, vol. 37(17), pages 1953-1966.

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