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Disorganization and Financial Collapse

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Author Info
Marin, Dalia
Schnitzer, Monika

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Abstract

Recently, 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-firm 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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2245.

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Date of creation: Sep 1999
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Handle: RePEc:cpr:ceprdp:2245

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Related research
Keywords: Barter Credit Constraint Financial Crisis Hold-Up Output Fall Transition

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Find related papers by JEL classification:
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

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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.:

  1. Ickes, B.W. & Ryterman, R., 1993. "Roadblock to Economic Reform: Inter-Enterprise Debt and the Transition to Markets," Papers 2-93-1, Pennsylvania State - Department of Economics.
  2. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1992. "The Transition to a Market Economy: Pitfalls of Partial Reform," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 889-906, August. [Downloadable!] (restricted)
  3. 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. [Downloadable!] (restricted)
  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. Olivier Blanchard & Michael Kremer, 1997. "Disorganization," William Davidson Institute Working Papers Series 38, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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  6. Gérard Roland & Thierry Verdier, 1999. "Transition and the output fall," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(1), pages 1-28, March. [Downloadable!] (restricted)
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  7. J Rostowski, 1993. "The Inter-Enterprise Debt Explosion in the Former Soviet Union: Causes, Consequences, Cures," CEP Discussion Papers 0142, Centre for Economic Performance, LSE. [Downloadable!]
  8. Marin, Dalia & Schnitzer, Monika, 1997. "The Economic Institution of International Barter," CEPR Discussion Papers 1658, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Ellingsen, Tore, 1998. "Payments in Kind," Working Paper Series in Economics and Finance 244, Stockholm School of Economics, revised 10 Feb 2000. [Downloadable!]
  2. Haizhou Huang & Dalia Marin & Chenggang Xu, 2004. "Financial Crisis, Economic Recovery, and Banking Development in Russia, and other FSU Countries," Discussion Papers 79, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
  3. Huang, Haizhou & Marin, Dalia & Xu, Cheng-Gang, 2003. "Financial Crisis, Economic Recovery and Banking Development in Former Soviet Union Economies," CEPR Discussion Papers 3794, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Evgeni Peev, 2002. "The Political Economy of Corporate Governance Change in Bulgaria: Washington Consensus, Primitive Accumulation of Capital, and Catching-Up in the 1990," CEI Working Paper Series 2002-1, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  5. Lubomír Lízal, 2002. "Determinants of Financial Distress: What Drives Bankruptcy in a Transition Economy? The Czech Republic Case," William Davidson Institute Working Papers Series 451, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  6. Richard B. Goud Jr., 2002. "Inter-Firm Non-Monetary Transactions in Russia: A Literature Review," Development and Comp Systems 0207001, EconWPA. [Downloadable!]
  7. Sergei Guriev & Igor Makarov & Mathilde Maurel, 2000. "Debt Overhang and Barter in Russia," William Davidson Institute Working Papers Series 339, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  8. Brana, Sophie & Maurel, Mathilde, 1999. "Barter in Russia: Liquidity Shortage Versus Lack of Restructuring," CEPR Discussion Papers 2258, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  9. Mario Gara, 2001. "The Emergence of Non-monetary Means of Payment in the Russian Economy," Post-Communist Economies, Taylor and Francis Journals, vol. 13(1), pages 5-39, March. [Downloadable!] (restricted)
  10. Wladimir Andreff, 2004. "Would a Second Transition Stage Prolong the Initial Period of Post-socialist Economic Transformation into Market Capitalism?," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 1(1), pages 7-31, June. [Downloadable!]
  11. Nauro F. Campos & Fabrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," William Davidson Institute Working Papers Series 470, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  12. Enrico Perotti, 2001. "Lessons from the Russian Meltdown: The Economics of Soft Legal Constraints," William Davidson Institute Working Papers Series 379, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  13. Wendy Carlin & Steven Fries & Mark Schaffer & Paul Seabright, 2000. "Barter and Non-Monetary Transactions in Transition Economies: Evidence from a Cross-Country Survey," CERT Discussion Papers 0004, Centre for Economic Reform and Transformation, Heriot Watt University. [Downloadable!]
  14. Dalia Marin & Haizhou Huang & Chenggang Xu, 2004. "Financial Crisis, Economic Recovery and Banking Development in Russia, Ukraine, and Other FSU Countries," IMF Working Papers 04/105, International Monetary Fund. [Downloadable!]
  15. Barbara, CRESTI, 2003. "U.S. Domestic Barter : an Empirical Investigation," Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Discussion Paper 2003005, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
  16. Gorodnichenko, Yuriy & Grygorenko, Yegor, 2008. "Are Oligarchs Productive? Theory and Evidence," IZA Discussion Papers 3282, Institute for the Study of Labor (IZA). [Downloadable!]
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