How do firms adjust their balance sheets and reallocate capital stock in response to recurrent productivity or profitability shocks? Why does the capital reallocation fluctuate procyclically, while the potential benefits to reallocate appear to be countercyclical? To answer these questions, this...

Illiquid secondary asset markets have adverse effects on firms' funding conditions and investment decisions. Yet, the micro-foundations of asset liquidity and the impact on aggregate business cycle, and the transmission of (unconventional) monetary policy interventions are scarcely explored. We...