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Long Term Contracts in International Trade

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Author Info

  • Amann, Erwin
  • Marin, Dalia

Abstract

Countertrade agreements in international trade refer to a practice in which an exporter agrees to purchase in the future, from the importer, commodities proportional to his original export sale. The paper analyzes why it might be efficient for agents to undertake trade through a reciprocal long-term transaction rather than a conventional spot transaction. More specifically, the paper argues that countertrade represents a rational response to market incompleteness because it allows the forward selling of commodities where no organized futures market exists. In this way countertrade helps reduce risk by providing information on future market conditions and by offering insurance against random fluctuations in these conditio.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 413.

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Date of creation: Apr 1990
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Handle: RePEc:cpr:ceprdp:413

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Related research

Keywords: Commodities; Futures Market; Incomplete Markets; International Trade;

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Cited by:
  1. Caves, Richard E & Marin, Dalia, 1992. "Countertrade Transactions: Theory and Evidence," Economic Journal, Royal Economic Society, vol. 102(414), pages 1171-83, September.
  2. Amann, Erwin & Marin, Dalia, 1994. "Risk-Sharing in International Trade," Munich Reprints in Economics 3110, University of Munich, Department of Economics.

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