Download This PaperCapital Reallocation
Annual Review of Financial Economics, 2018
36 Pages Posted: 7 Oct 2018
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Capital Reallocation
Capital Reallocation
Capital Reallocation
Date Written: September 14, 2018
Abstract
Capital reallocation is procyclical, despite measured productive reallocative opportunities being acyclical, or even countercyclical. This paper reviews the advances in the literature studying the causes and consequences of capital reallocation (or lack thereof). We provide a comprehensive set of capital reallocation stylized facts for the US, 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, Misallocation, Business Cycles, Financial Frictions
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