Disorganization and Financial Collapse

Posted: 17 Apr 2005

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)

Monika Schnitzer

University of Munich - Department of Economics; Centre for Economic Policy Research (CEPR)

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Abstract

Since the fall of communism, the former Soviet Union experienced a strong output decline and a dramatic increase in arrears and barter. We develop a model which explains how these three phenomena are connected. We introduce liquidity and credit constraints into a model of disorganization and show how these problems can alleviate the hold-up problem. We argue further that barter creates a hostage that allows to deal with disorganization when credit enforcement becomes prohibitively costly. Based on a firm survey in Ukraine in 1997, we test how input shortages, financial shortages and barter affect output growth of firms.

Keywords: Transition, Financial crisis, Output fall, Credit constraint, Barter

JEL Classification: G3, P3, D2, O1

Suggested Citation

Marin, Dalia and Schnitzer, Monika, Disorganization and Financial Collapse. European Economic Review, Vol. 49, No. 2, February 2005. Available at SSRN: https://ssrn.com/abstract=690283

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

Monika Schnitzer

University of Munich - Department of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany
+49 89 2180 2217 (Phone)
+49 89 2180 2767 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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