| In this thesis, I offer new insights to the analysis of financial integration and financial crisis by using dynamic general equilibrium model. My major contribution is explaining the behaviors of business cycles and capital flows during financial integration and financial crisis with financial frictions. I show that (i) financial frictions can help explain the economic fluctuations of emerging market economies before and after financial integration; (ii) financial frictions can help explain worsening consumption smoothing in emerging economies after financial liberalization; (iii) financial frictions can help explain increasing capital flows from developed economies to emerging economies during financial crisis. The work in this thesis reveals the important role of financial frictions in understanding macroeconomic phenomena. It also has a wealth of interesting policy implications. |
