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Creating Creditworthiness through Reciprocal Trade

Author

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  • Dalia Marin
  • Monika Schnitzer

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.

Suggested Citation

  • Dalia Marin & Monika Schnitzer, 2003. "Creating Creditworthiness through Reciprocal Trade," Review of International Economics, Wiley Blackwell, vol. 11(1), pages 159-174, February.
    • Handle: RePEc:bla:reviec:v:11:y:2003:i:1:p:159-174
    DOI: 10.1111/1467-9396.00375
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    Cited by:

    1. Germán H. GONZALEZ & Alexis S. ESPOSTO & Valentina N. VIEGO, 2015. "Reciprocity in bilateral trade flows: An empirical analysis for trade between Australia and Latin American countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 15(1), pages 31-44.
    2. Yothin Jinjarak, 2004. "On the hidden links between financing costs and international trade patterns," Econometric Society 2004 Far Eastern Meetings 501, Econometric Society.
    3. Dalia Marin & Monika Schnitzer, 2002. "The Economic Institution Of International Barter," Economic Journal, Royal Economic Society, vol. 112(479), pages 293-316, April.
    4. Marin, Dalia & Schnitzer, Monika, 2005. "Disorganization and financial collapse," European Economic Review, Elsevier, vol. 49(2), pages 387-408, February.
    5. Jos?? Noguera & Susan J. Linz, 2005. "Barter, Credit, and Welfare: A theoretical inquiry into the barter phenomenon in Russia," William Davidson Institute Working Papers Series wp757, William Davidson Institute at the University of Michigan.
    6. Marianna Belloc, 2006. "Institutions and International Trade: A Reconsideration of Comparative Advantage," Journal of Economic Surveys, Wiley Blackwell, vol. 20(1), pages 3-26, February.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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