In traditional financial theorizing, business cycles are of limited relevance for the understanding of capital structure mechanisms. A number of other dimensions are more important (agency costs, market timing, signaling, etc.), and business cycles proxies are not robust in empirical studies...

There has been much discussion of the differences in macroeconomic performance and prospects between the US, Japan and the euro area. Using Markov-switching techniques, in this paper we identify and compare specifically their major business-cycle features and examine the case for a common...