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The Role of Trust and Control Institutions in Informal Monetary Transactions

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  • A. LYASKO.

Abstract

Auxiliary institutions fail to perform the function of protecting economic agents’ trust in the liquidity of various monetary obligations. Still, despite these conclusions, there exist some forms of monetary arrangements that seemingly demonstrate a high level of trust among their participants. The durability and continuous reproduction of these monetary arrangements in both developing markets and mature economies need to be explained. Part of this explanation has to address the question of trust arising among the parties to these financial transactions and its role in preventing opportunism and breach of promises made by their participants. As shown in this paper, a possible answer to this question might consist in the argument that the protective role of trust in these financial arrangements is replaced by the opposite norm of control over the agents’ behavior within close-knit social and economic communities. The degree of control may vary, but control always crowds out trust in order to add reliability to these financial setups.

Suggested Citation

  • A. Lyasko., 2012. "The Role of Trust and Control Institutions in Informal Monetary Transactions," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 6.
  • Handle: RePEc:nos:voprec:2012-06-3
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    More about this item

    Keywords

    institutions; development; trust; control; enforcement; credit associations.;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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