EconPapers    
Economics at your fingertips  
 

Endogenous Liquidity and Capital Reallocation

Wei Cui (), Randall Wright and Yu Zhu

Staff Working Papers from Bank of Canada

Abstract: We study economies where firms acquire capital in primary markets then retrade it in secondary markets after information on idiosyncratic productivity arrives. Our secondary markets incorporate bilateral trade with search, bargaining and liquidity frictions. We distinguish between full and partial sales (one firm gets all or some of the other’s capital). Both exhibit interesting long- and short-run patterns in data that the model can match. Depending on monetary and credit conditions, more partial sales occur when liquidity is tight. Quantitatively, we find significant steady-state and business-cycle implications. We also investigate the impact of search, taxation and persistence in firm-specific shocks.

Keywords: Business fluctuations and cycles; Monetary policy (search for similar items in EconPapers)
Pages: 60 pages
Date: 2022-06
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dem, nep-dge, nep-fdg and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
https://www.bankofcanada.ca/wp-content/uploads/2022/06/swp2022-27.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:22-27

Access Statistics for this paper

More papers in Staff Working Papers from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2024-02-17
Handle: RePEc:bca:bocawp:22-27