Capital reallocation and liquidity

Journal Article (Journal Article)

This paper shows that the amount of capital reallocation between firms is procyclical. In contrast, the benefits to capital reallocation appear countercyclical. We measure the amount of reallocation using data on flows of capital across firms and the benefits to capital reallocation using several measures of the cross-sectional dispersion of the productivity of capital. We then study a calibrated model economy where capital reallocation is costly and impute the cost of reallocation. We find that the cost of reallocation needs to be substantially countercyclical to be consistent with the observed joint cyclical properties of reallocation and productivity dispersion. © 2006 Elsevier B.V. All rights reserved.

Full Text

Duke Authors

Cited Authors

  • Eisfeldt, AL; Rampini, AA

Published Date

  • April 1, 2006

Published In

Volume / Issue

  • 53 / 3

Start / End Page

  • 369 - 399

International Standard Serial Number (ISSN)

  • 0304-3932

Digital Object Identifier (DOI)

  • 10.1016/j.jmoneco.2005.04.006

Citation Source

  • Scopus