A growing empirical literature finds that the allocation of credit across firms is as important as its total volume for economic performance. This paper investigates the process through which credit is reallocated across US businesses employing the methodology developed by Davis and Haltiwanger (1992) for the analysis of job reallocation. We find that credit reallocation is intense, highly volatile and moderately procyclical and that it primarily occurs across firms similar in size, industry or location. The results suggest that microeconomic heterogeneity can play a key role in the interaction between the credit market and the aggregate economy.
