Trust vs Illusion: What is Driving Demonetization in Russia?

27 Pages Posted: 17 Jan 2001

See all articles by Dalia Marin

Dalia Marin

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Date Written: June 2000

Abstract

The virtual economy argument for Russia suggests that barter allows the parties to pretend that the manufacturing sector is producing value added 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 Ukraine in 1997. Based on pricing data of 165 barter deals we find no systematic difference in the pricing behavior in non- cash transactions across sectors. What appears to matter for the pricing behavior is whether the firm is on the selling or buying end of the barter transaction. We offer a model which sees this pricing behavior as a mechanism to deal with the absence of trust and liquidity in the economy.

Suggested Citation

Marin, Dalia, Trust vs Illusion: What is Driving Demonetization in Russia? (June 2000). Available at SSRN: https://ssrn.com/abstract=254604 or http://dx.doi.org/10.2139/ssrn.254604

Dalia Marin (Contact Author)

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany
+49 89 2180 2446 (Phone)
+49 89 2180 6227 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
317
Abstract Views
2,223
Rank
174,487
PlumX Metrics