IDEAS home Printed from https://ideas.repec.org/p/eer/wpalle/02-06e.html
   My bibliography  Save this paper

A Three-Sector Model of the Russian Virtual Economy

Author

Listed:
  • Agapov Stanislav
  • Boyarchenko Svetlana

    ()

  • Levendorsky Sergey

    ()

Abstract

The Russian economy has evolved into a hybrid form, a partially monetized quasi-market system that has been called the virtual economy. In the virtual economy, barter and non-monetary transactions play a key role in transferring value from productive activities to the natural monopolies and loss-making sectors of the economy. The project aims at providing a consistent and multi-facet exposition of main features of the Russian virtual economy, and explains why it is different from other transition economies. In particular, the endogenous appearance of money substitutes and wide-spread use of non-monetary transactions are explained as a result of the optimizing behavior of agents in the economy, given the inherited distorted structure, the existence of large natural monopolies, the unproductive sector organized into informal networks, and the government policies aimed at the support of this sector. We highlight the typical distortions of the price system, and provide an explanation of the observed dynamics of the volume of money substitutes in circulation after August 1998 crisis. We show that the Russian virtual economy can be in one of two steady states with approximately the same price systems but essentially different volumes of money substitutes in circulation. Transition into the state with the smaller volume of money substitutes in circulation can be caused by an increase of the number of active producers resulting from some external shock. We conjecture that should the productive business activity be suppressed, then the economy can swiftly return to the former state with the large volume of money substitutes in circulation.

Suggested Citation

  • Agapov Stanislav & Boyarchenko Svetlana & Levendorsky Sergey, 2003. "A Three-Sector Model of the Russian Virtual Economy," EERC Working Paper Series 02-06e, EERC Research Network, Russia and CIS.
  • Handle: RePEc:eer:wpalle:02-06e
    as

    Download full text from publisher

    File URL: https://eercnetwork.com/default/download/creater/working_papers/file/e292b24e6b84af42018b2cfb67cdd8f7f82a2dc9.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Williamson, Stephen D, 1999. "Private Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 469-491, August.
    2. Ricardo de O. Cavalcanti & Andres Erosa & Ted Temzelides, 1999. "Private Money and Reserve Management in a Random-Matching Model," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 929-945, October.
    3. Ricardo de O. Cavalcanti & Neil Wallace, 1999. "Inside and outside money as alternative media of exchange," Proceedings, Federal Reserve Bank of Cleveland, pages 443-468.
    4. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-954, August.
    5. S.I. Boyarchenko & S.Z. Levendorskii, 2000. "Search-Money-and-Barter Models of Financial Stabilization," William Davidson Institute Working Papers Series 332, William Davidson Institute at the University of Michigan.
    6. Wallace, Neil & Zhou, Ruilin, 1997. "A model of a currency shortage," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 555-572, December.
    7. Svetlana Boyarchenko & Sergei Levendorskii, 2004. "Inside and Outside Money, with an Application to the Russian Virtual Economy," Macroeconomics 0405009, University Library of Munich, Germany.
    8. Shouyong Shi, 1997. "A Divisible Search Model of Fiat Money," Econometrica, Econometric Society, vol. 65(1), pages 75-102, January.
    9. Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 118-141, February.
    10. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Russia; money substitutes; search models;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eer:wpalle:02-06e. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anton Pashchenko). General contact details of provider: http://www.eercnetwork.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.