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The Economic Institution of International Barter

  • Marin, Dalia
  • Schnitzer, Monika

Starting with the international debt crisis in the early 1980s, the volume of international barter trade increased substantially. This paper examines how barter can help highly indebted countries to finance imports if they cannot use standard credit arrangements. We argue that payment in goods is easier to enforce than payment in money. But there is also a risk that the debtor pays with inferior quality products. We rank goods with respect to these incentive properties and derive the economic institution of commodity money which explains the trade pattern in barter. The predictions of our model are consistent with data on actual barter contracts.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1658.

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Date of creation: Jun 1997
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Handle: RePEc:cpr:ceprdp:1658
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  1. Abhijit V. Banerjee & Eric S. Maskin, 1996. "A Walrasian Theory of Money and Barter," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 955-1005.
  2. Bulow, J. & Rogoff, K., 1988. "Sovereign Debt: Is To Forgive To Forget?," Working papers 8813, Wisconsin Madison - Social Systems.
  3. Prendergast, Canice & Stole, Lars, 2001. "The non-monetary nature of gifts," European Economic Review, Elsevier, vol. 45(10), pages 1793-1810, December.
  4. Marin, Dalia & Schnitzer, Monika, 2003. "Creating creditworthiness through reciprocal trade," Munich Reprints in Economics 19259, University of Munich, Department of Economics.
  5. Caves, Richard E. & Marin, Dalia, 1992. "Countertrade transactions: theory and evidence," Munich Reprints in Economics 19952, University of Munich, Department of Economics.
  6. Hart, Oliver & Moore, John, 1995. "Debt and Seniority: An Analysis of the Role of Hard Claims in Constraining Management," American Economic Review, American Economic Association, vol. 85(3), pages 567-85, June.
  7. Marin, Dalia & Schnitzer, Monika, 1995. "Tying Trade Flows: A Theory of Countertrade with Evidence," American Economic Review, American Economic Association, vol. 85(5), pages 1047-64, December.
  8. Stewart C. Myers & Raghuram G. Rajan, 1995. "The Paradox of Liquidity," NBER Working Papers 5143, National Bureau of Economic Research, Inc.
  9. Hennart, Jean-Francois & Anderson, Erin, 1993. "Countertrade and the Minimization of Transaction Costs: An Empirical Examination," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(2), pages 290-313, October.
  10. Kletzer, K.M. & Wright, B.D., 1990. "Sovereign Debt Renegotiation In A Consumption-Smoothing Model," Papers 610, Yale - Economic Growth Center.
  11. Marin, Dalia, 1990. "Tying in International Trade," Munich Reprints in Economics 3114, University of Munich, Department of Economics.
  12. Amann, Erwin & Marin, Dalia, 1994. "Risk-Sharing in International Trade," Munich Reprints in Economics 3110, University of Munich, Department of Economics.
  13. Eaton, Jonathan, 1990. "Debt Relief and the International Enforcement of Loan Contracts," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 43-56, Winter.
  14. Amann, Erwin & Marin, Dalia, 1994. "Risk-Sharing in International Trade: An Analysis of Countertrade," Journal of Industrial Economics, Wiley Blackwell, vol. 42(1), pages 63-77, March.
  15. Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March.
  16. Casella, Alessandra & Rauch, James E, 1998. "Overcoming Informational Barriers to International Resource Allocation: Prices and Group Ties," CEPR Discussion Papers 1978, C.E.P.R. Discussion Papers.
  17. Greif, Avner, 1992. "Institutions and International Trade: Lessons from the Commercial Revolution," American Economic Review, American Economic Association, vol. 82(2), pages 128-33, May.
  18. Abhijit V. Banerjee & Eric S. Maskin, 1996. "A Walrasian Theory of Money," Harvard Institute of Economic Research Working Papers 1753, Harvard - Institute of Economic Research.
  19. Gooptu, Sudarshan & Martinez Peria, Maria Soledad, 1992. "Factors that affect short-term commercial bank lending to developing countries," Policy Research Working Paper Series 886, The World Bank.
  20. Jonathan Eaton & Mark Gersovitz, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Oxford University Press, vol. 48(2), pages 289-309.
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