Financial, legal and organisational security of compensatory exchange systems using the example of local currencies

Abstract

PURPOSE: The purpose of this article is to identify the factors shaping the perception and evaluation of local currency systems and to analyse the financial and economic as well as legal and institutional determinants of financial compensatory exchange systems.

DESIGN/METHODOLOGY/APPROACH: The methods used in the article include a critical analysis of the literature, a comparative method and structural equation modelling (SEM).

FINDINGS: The study showed that legal and institutional determinants proved to be a predictor of economic and social determinants, as well as for the overall assessment of the local currency system, while financial and economic determinants, although important, appear to play a secondary role.

PRACTICAL IMPLICATIONS: The local compensatory exchange systems operating in Poland, which use local currencies as one of their tools, require a financial commitment not only on the part of entities that create such ventures, but also on the part of the state, which could secure them in legal and institutional terms. These two main determinants could influence the success of such systems in the local economy and ensure a higher level of confidence and economic security for specific regions and entities operating therein.

ORIGINALITY/VALUE: In addition, local compensatory exchange systems could strengthen local entrepreneurship, the economic security of entities and the local community.