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Journal of Economic Theory and Econometrics
JETEM/계량경제학보/計量經濟學報/JKES
Journal of the Korean Econometric Society

Capital Reallocation and Liquidity with Search Frictions

Vol.23, No.1, March , 1–29



  •   (Yonsei University)

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Abstract  

I construct a model of an asset market subject to search frictions, in an environment where both investment and asset liquidity are determined endogenously. This provides a natural framework to analyze the interaction between capital reallocation and liquidity in response to aggregate shocks, which I assess quantitatively. The search model of capital reallocation exhibits strong internal propagation, and can generate substantial changes in factor utilization following aggregate shocks.


Keywords
   capital reallocation, liquidity, investment, asset market, search

JEL classification codes
   E22, E32, E44, J64
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