Trust vs Illusion: What is driving Demonetization in Russia?
AbstractThe virtual economy argument for Russia suggests that barter allows the parties to pretend that the manufacturing sector is producing value by enabling this sector to sell its output at a higher price than its market value. We confront this prediction with the actual pricing behavior of industrial sectors in the Ukraine in 1997. Based on pricing data of 165 barter deals we find no systematic difference in the pricing behavior in barter across sectors. What appears to matter for the pricing behavior is whether the sector is on the selling or buying end of the barter transaction. We offer an alternative explanation which sees this pricing behavior as a mechanism to deal with the absence of trust and financial discipline in the economy.
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Bibliographic InfoPaper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 73.
Date of creation: Jun 2000
Date of revision:
imperfect input and capital markets ; the virtual economy ; trade credit ; trust ; contract enforcement;
Other versions of this item:
- Marin, Dalia, 2000. "Trust Vs Illusion: What is Driving Demonetization in Russia?," CEPR Discussion Papers 2570, C.E.P.R. Discussion Papers.
- D20 - Microeconomics - - Production and Organizations - - - General
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
- P30 - Economic Systems - - Socialist Institutions and Their Transitions - - - General
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- Kim, Byung-Yeon & Pirttilä, Jukka & Rautava, Jouko, 2001.
"Money, Barter and Inflation in Russia,"
BOFIT Discussion Papers
15/2001, Bank of Finland, Institute for Economies in Transition.
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