Citation

Discussion Paper Details

Please find the details for DP2245 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Disorganization and Financial Collapse

Author(s): Dalia Marin and Monika Schnitzer

Publication Date: September 1999

Keyword(s): Barter, Credit Constraint, Financial Crisis, Hold-Up, Output Fall and Transition

Programme Area(s): Financial Economics, Industrial Organization and Transition Economics

Abstract: Recently, Blanchard and Kremer (BK) argued that disorganization has led to the output decline in the former Soviet Union. In this paper we introduce liquidity and credit constraints into the BK model and show how these problems can alleviate the hold-up problem. We argue further that barter creates a hostage which allows to deal with disorganization when credit enforcement is prohibitively costly. The theory helps to explain how the three observed phenomena of output decline, inter-firm arrears and barter in transition economies are connected. Based on a survey of 165 barter deals in the Ukraine in 1997, we reproduce the BK result with firm level and deal-specific data and we show that in addition to the input shortage the financial shortage and barter have each an important effect on output growth.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2245

Bibliographic Reference

Marin, D and Schnitzer, M. 1999. 'Disorganization and Financial Collapse'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2245