Capital market imperfections play a major role in macroeconomic fluctuations such as business cycles, bubbles and financial crises. This course will first analyze the micro-foundations of capital market imperfections and theories about firms' capital structure. Next we will focus on how these elements can be incorporated into a range of macroeconomic models. The second half of the course will focus on applications including the financial accelerator, credit crunches, bubbles and emerging market crises as well as the macroeconomic instability caused by imperfections in insurance and debt markets. The course is designed with a view to help students make the transition from coursework to individual research. Therefore the core requirement will be the development of research proposals and a course paper.