Barter in international trade: a rationale

Barter is a trade practice in which goods are accepted as payment for other goods. the paper provides a rationale for why it might be efficient for agents to use barter rather than a traditional cash transaction in international trade. more specifically. the paper argues, that barter can be viewed as an exchange in international trade which represents a rational response to market distortions. thus, barter can be understood as a second-best outcome in the presence of market imperfections. the welfare gains due to the reduction of these distortions might outweigh the losses due to higher transaction costs when the advantages of money-mediated exchange are circumvented.;