Capital Reallocation and Liquidity ∗

  title={Capital Reallocation and Liquidity ∗},
  author={Andrea L. Eisfeldt},
  • Andrea L. Eisfeldt
  • Published 2002
This paper shows that the amount of capital reallocation between firms is procyclical. In contrast, the benefits to capital reallocation appear countercyclical. We measure the amount of reallocation using data on flows of capital across firms and the benefits to capital reallocation using several measures of the cross sectional dispersion of the productivity of capital. We then study a calibrated model economy where capital reallocation is costly and impute the cost of reallocation. We find… CONTINUE READING
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