Capital Reallocation

Andrea L. Eisfeldt () and Yu Shi ()
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Andrea L. Eisfeldt: Anderson School of Management, University of California, Los Angeles, California 90095, USA
Yu Shi: Anderson School of Management, University of California, Los Angeles, California 90095, USA

Annual Review of Financial Economics, 2018, vol. 10, issue 1, 361-386

Abstract: Capital reallocation is procyclical, despite measured productive reallocative opportunities being acyclical or even countercyclical. This article reviews the advances in the literature studying the causes and consequences of capital reallocation (or lack thereof). We provide a comprehensive set of stylized facts about capital reallocation for the United States and an illustrative model of capital reallocation in equilibrium. We relate capital reallocation to the broader literatures on business cycles with financial frictions and on resource misallocation and aggregate productivity. Throughout, we provide directions for future research.

Keywords: capital reallocation; capital liquidity; investment; business cycles; misallocation; financial frictions (search for similar items in EconPapers)
JEL-codes: E00 E13 E22 E32 G00 G31 G34 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (10)

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