DP2258 Barter in Russia: Liquidity Shortage Versus Lack of Restructuring

Author(s): Sophie Brana, Mathilde Maurel
Publication Date: October 1999
Keyword(s): Barter, Non-Monetary Transactions, Russia, Transition, Virtual Economy
JEL(s): C22, C23, E5, P2
Programme Areas: Transition Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2258

Barter in Russia can be explained by firms' liquidity constraint: it is strongly correlated with financial tightness. However, a microeconomic analysis reveals that the rationale behind this liquidity constraint is different according to the firm situation. For firms in a good economic situation, but faced with adverse selection problems and having no access to bank credit, barter acts as a substitute for short-term credit. While for indebted firms, barter, in the same way as external finance, is a way of avoiding costly restructuring.