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Tying Trade Flows: A Theory of Countertrade

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  • Marin, Dalia
  • Schnitzer, Monika

Abstract

A countertrade contract ties an export to an import. Usually, countertrade is seen as a form of bilateralism and reciprocity and thus as an inefficient form of international exchange. In this paper we argue that there are circumstances where the tying of two technologically unrelated trade flows may be efficiency enhancing. We show that countertrade can be seen as an efficient institution that solves moral hazard problems and restores creditworthiness of countries with large outstanding debt. We test the implications of our model using a sample of 230 countertrade contacts.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 946.

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Date of creation: May 1994
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Handle: RePEc:cpr:ceprdp:946

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Related research

Keywords: Countertrade; Creditworthiness; Double Moral Hazard Problem; Sovereign Debt; Technology Transfer;

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Cited by:
  1. Amann, Erwin & Marin, Dalia, 1994. "Risk-Sharing in International Trade," Munich Reprints in Economics 3110, University of Munich, Department of Economics.
  2. Ellingsen, Tore, 1998. "Payments in Kind," Working Paper Series in Economics and Finance 244, Stockholm School of Economics, revised 10 Feb 2000.
  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. Barbara Cresti, 2005. "US domestic barter: an empirical investigation," Applied Economics, Taylor & Francis Journals, vol. 37(17), pages 1953-1966.

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