Trust vs Illusion: What is driving Demonetization in Russia?

Dalia Marin

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: The virtual economy argument for Russia suggests that barter allows the parties to pretend that the manufacturing sector is producing value by enabling this sector to sell its output at a higher price than its market value. We confront this prediction with the actual pricing behavior of industrial sectors in the Ukraine in 1997. Based on pricing data of 165 barter deals we find no systematic difference in the pricing behavior in barter across sectors. What appears to matter for the pricing behavior is whether the sector is on the selling or buying end of the barter transaction. We offer an alternative explanation which sees this pricing behavior as a mechanism to deal with the absence of trust and financial discipline in the economy.

Keywords: imperfect input and capital markets; the virtual economy; trade credit; trust; contract enforcement (search for similar items in EconPapers)
JEL-codes: D20 G30 O10 P30 (search for similar items in EconPapers)
Date: 2000-06
References: Add references at CitEc
Citations: View citations in EconPapers (5)

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Working Paper: Trust Vs Illusion: What is Driving Demonetization in Russia? (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenec:73

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