Cui, Wei;
Wright, Randall;
Zhu, Yu;
(2025)
Endogenous Liquidity and Capital Reallocation.
Journal of Political Economy
, 133
(1)
pp. 146-189.
10.1086/732522.
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Abstract
This paper studies economies where firms acquire capital in primary markets and then, after idiosyncratic productivity shocks, retrade it in secondary markets that incorporate bilateral trade with search, bargaining, and liquidity frictions. We distinguish 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, as measured by inflation. Quantitatively, the model can match these patterns plus the standard business cycle facts. We also investigate the impact of search frictions, monetary and fiscal policy, persistence in shocks, and returns to scale.
| Type: | Article |
|---|---|
| Title: | Endogenous Liquidity and Capital Reallocation |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1086/732522 |
| Publisher version: | https://doi.org/10.1086/732522 |
| Language: | English |
| Additional information: | This version is the version of record. For information on re-use, please refer to the publisher’s terms and conditions. |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10188144 |
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