and

This paper develops a model in which costly barter is used by firms to protect working capital against outside creditors. Although creditors could agree to postpone debt payments 1 Earlier versions of this paper were circulated as CEPR Discussion Paper 2652 and WDI Working Paper 339. Parts of the working papers were included into Makarov’s M.A. thesis at NES (Makarov, 2000) and Guriev’s habilitation thesis at CEMI (Guriev, 2001). We are grateful to David Brown and Serguei Tsoukhlo for providing us with data. Part of this work was carried out in the New Economi