Cross-country differences in the size and composition of the government budget have stimulated a lively debate on the effect of fiscal policy. Quite a large body of evidence has accumulated on the influence of fiscal policy instruments on the macroeconomy while less is known about the distributional effects of changes in the government budget's composition. Theoretically, macroeconomists have limited their analysis to the impact of a limited set of fiscal policy variables in economies with perfectly competitive labor markets. However, in several OECD countries (mainly continental Europe) unions are very powerful and their presence can influence the effects and the transmission mechanism of fiscal shocks.
The ongoing financial crisis and the resultant freezing of credit markets suddenly emphasized the advantage of having a stockpile of cash and liquid investments for firm operations and its performance. The credit crisis has also had a significant effect on how investors view and value corporate holdings of cash and liquid investments. For example, a recent article in The Economist (Nov 20, 2008) states "How times change. Not long ago companies with cash piles were assailed by corporate activists to return money to shareholders. Nowadays it is only a slight exaggeration to say that the more cash that investors see in a firms coffers, the happier they are."
The determination of business cycle turning points is a classic problem in economic statistics. Many of our basic notions of the lead-lag relations among macroeconomic time series are informed by traditional methods of dating turning points for individual series and comparing them to turning points of the overall economy. Chronologies of business cycle turning points (in the jargon, reference cycle chronologies) are currently maintained in the United States by the NBER Business Cycle Dating Committee, in Europe by the CEPR, and by similar organizations in other countries.
