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Cyclical Capital Reallocation

Author

Listed:
  • Wei Cui

    (University College London)

  • Randall Wright

    (University of Wisconsin)

  • Yu Zhu

    (Bank of Canada)

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.

Suggested Citation

  • Wei Cui & Randall Wright & Yu Zhu, 2019. "Cyclical Capital Reallocation," 2019 Meeting Papers 1362, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:1362
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    Cited by:

    1. Baughman, Garth & Rabinovich, Stanislav, 2021. "Capacity choice, monetary trade, and the cost of inflation," European Economic Review, Elsevier, vol. 134(C).
    2. Randall Wright & Sylvia Xiao & Yu Zhu, 2020. "Frictional Capital Reallocation with Ex Post Heterogeneity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 37, pages 227-253, August.

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