Barter, Credit, and Welfare: A theoretical inquiry into the barter phenomenon in Russia

Abstract

This paper develops a model to investigate the welfare implications of barter in Russia and other transition economies during the 1990s. We argue that barter is a welfare-improving phenomenon that acts as a defense mechanism against monetary instability. When firms react to tighter credit markets by switching to barter, the risk they face diminishes, allowing for a higher level of production.Barter, welfare, Russia, money, credit, payment system, interest rate