Creating creditworthiness through reciprocal trade

Dalia Marin and Monika Schnitzer ()

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: The paper investigates how barter can be used to finance imports and restore the creditworthiness of highly indebted countries when reputation as an enforcement mechanism for credit repayment does not work. The authors argue that payments in goods can be used to collateralize a trade credit and thus improve the creditor’s incentives to pursue defaulting debtors. Furthermore, it is shown that barter is particularly advantageous if export revenues of the debtor country are stochastic, even in the absence of risk aversion. The predictions of the model are consistent with data on actual barter contracts.

Date: 2003
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Citations: View citations in EconPapers (5)

Published in Review of International Economics 1 11(2003): pp. 159-174

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Related works:
Journal Article: Creating Creditworthiness through Reciprocal Trade (2003)
Working Paper: Creating Creditworthiness through Reciprocal Trade (1995)
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:19259

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