Cyclical Capital Reallocation

Wei Cui, Randall Wright and Yu Zhu
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Yu Zhu: Bank of Canada

No 1362, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: This paper studies economies where capital is accumulated in primary markets and reallocated in frictional secondary markets. We distinguish between reallocation in terms of either an acquisition (i.e., a full buyout) or a partial sale (i.e., sales of some property, plant or equipment). We document that in the data, the different types of reallocation exhibit different cyclicality. We then propose a theory of capital reallocation with various frictions, including search and bargaining problems, plus liquidity considerations, that generate reallocation dynamics and other aspects of the data.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:1362

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