Posted: 8 Nov 2018
Date Written: November 2018
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.
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