SMU SOE Seminar (March 8, 2023): Frictional Capital Reallocation

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ABSTRACT This paper studies economies where firms acquire capital in primary markets, then, after idiosyncratic productivity shocks, retrade it in secondary markets incorporating bilateral trade with search, bargaining and liquidity frictions. We distinguish carefully between full or partial sales (one firm gets all or some of the other’s capital), and document several long- and short-run empirical patterns between these variables and the cost of liquidity measured by inflation. Quantitatively, the model can match these patterns plus the facts deemed important in business cycle theory. We also investigate the impact of search frictions, monetary and fiscal policy and persistence in firmspecific shocks. Keywords: Capital, Investment, Reallocation, Liquidity JEL Codes: E22, E44 Click here to view the CV. Click here to view the paper.
		PRESENTER Randall Wright University of Wisconsin-Madison
		RESEARCH FIELDS Monetary Economics Macroeconomics Labor Economics
		DATE: 8 March 2023 (Wednesday)
		TIME: 4pm - 5.30pm
		VENUE: Meeting Room 5.1, Level 5 School of Economics Singapore Management University 90 Stamford Road Singapore 178903