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Barter in Russia: Liquidity Shortage versus Lack of Restructuring

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  • Sophie Brana
  • Mathilde Maurel

Abstract

The rapid growth of barter is one of the most surprising phenomena in Russia: As a percentage of industrial sales it steadily increased from 5% in 1992 to nearly 55% in 1998. Unknown in CEEC's transition countries, barter is only one aspect of the Russian economy's demonetisation [process, along with dollarisation, growing arrears, and the widespread use of veksels and offsets. Barter is often seen as the consequence of the lack of restructuring, but some authors argue that it is a mechanism used to avoid shutting down potentially viable firms, in a context of market imperfections. The implications differ depending on the analysis chosen: in the first case, an expansionary monetary policy might not be appropriate, while the contrary is true if the demonetisation process jeopardizes potentially good enterprises. This paper aims to assess this phenomenon in the Russian economy. The paper's main contribution to work in this field (reviewed and documented in section II) is to highlight two different rationales for barter. Before studying the latter more closely, section III uses official monthly data collected by the central bank of Russia, the Goskomstat, and the Russian Economic Barometer (REB), to emphasize the macro-economic features of barter in Russia, and, more specifically, the link between monetary policy and bartering activity. It appears that macroeconomic policy and macroeconomic indicators are unable to explain the whole process. In section IV, quarterly statistics for 1995 and 1996 taken from the REB survey of roughly 200 firms make it possible to implement a more qualitative survey. The conclusion is striking: barter is used by potentially viable firms as a way of avoiding closure, while at the same time financing increasing inventories and soft goods in the case of indebted firms who use barter transactions, bank credit and choose to accumulate arrers in order to avoid restructuring.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 271.

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Length: pages
Date of creation: 01 Jun 1999
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Handle: RePEc:wdi:papers:1999-271

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Keywords: barter; non-monetary transactions; virtual economy; Russia; transition;

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References

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Cited by:
  1. Guriev, Sergei & Kvassov, Dmitry, 2000. "Barter For Price Discrimination?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2449, C.E.P.R. Discussion Papers.
  2. Vasily Astrov & Korkut Boratav & Sandor Richter, 2002. "Monthly Report 05/2002," wiiw Monthly Reports, The Vienna Institute for International Economic Studies, wiiw 2002-05, The Vienna Institute for International Economic Studies, wiiw.
  3. 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.
  4. Jose Noguera, 2004. "Is Barter a Hobson’s Choice? A theory of barter and credit rationing," CERGE-EI Working Papers wp239, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  5. Kim, Byung-Yeon & Pirttila, Jukka, 2004. "Money, barter, and inflation in Russia," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 297-314, June.
  6. Sergei Guriev & Dmitry Kvassov, 2000. "Price Discrimination Through Barter: A Theory and Evidence from Russia," Econometric Society World Congress 2000 Contributed Papers, Econometric Society 0397, Econometric Society.
  7. Richard B. Goud Jr., 2002. "Inter-Firm Non-Monetary Transactions in Russia: A Literature Review," Development and Comp Systems 0207001, EconWPA.
  8. Sergei Guriev & Igor Makarov & Mathilde Maurel, 2000. "Debt Overhang and Barter in Russia," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 339, William Davidson Institute at the University of Michigan.
  9. Vlad Ivanenko, 2004. "Access to liquidity and non-monetary trade in Russia," Post-Communist Economies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 16(1), pages 21-38.
  10. Sergei Guriev & Dmitry Kvassov, 2000. "Barter for price discrimination? A theory and evidence from Russia," Working Papers w0007, Center for Economic and Financial Research (CEFIR).
  11. José Noguera & Susan J. Linz, 2005. "Barter, Credit, and Welfare: A theoretical inquiry into the barter phenomenon in Russia," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan wp757, William Davidson Institute at the University of Michigan.
  12. Minzyuk, Larysa, 2010. "The development of non-monetary means of payment," MPRA Paper 28167, University Library of Munich, Germany, revised 2010.
  13. Mario Gara, 2001. "The Emergence of Non-monetary Means of Payment in the Russian Economy," Post-Communist Economies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 13(1), pages 5-39.

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