Barter's Role in the Money–income Relationship

Abstract

This paper deals with a reassessment of the money-income relation and predictability of changes in GDP with innovations in money in the presence of barter. Organized barter as a method of transaction, through barter exchanges, has been growing rapidly in the US economy. With the introduction of computers and the use of a credit system which allows non-simultaneous transactions, barter exchanges have found new opportunities to offer an alternative to monetary transactions. Analysis of data from the 1974-96 period provides some evidence suggesting that inclusion of barter in the output function improves the marginal predictability of money.