Essays on Financial Economics and Economic Policy Modeling.

Summary The complexified modern economy, which results from a heterogeneous human society, requires economists and policy makers to develop complex economic models. In addition to this complexity, economic policies vary from country to country.This thesis addresses these complexities of modern economies.In the first three chapters of this thesis, I improve upon existing theories to evaluate the role of financial intermediary agents, real estate markets, and credit in the economy, using Dynamic Stochastic General Equilibrium (DSGE) models. Data from three periods of the U.S. economy, including the economic climate before the Great Recession, the systemic collapse of 2008, and fiscal policies after the crisis, are imputed into the models. DSGE models have often been criticized for oversimplifying financial markets.I have included financial frictions on different sides of the economy to address the failures of previous models.Simulation results indicate that introducing these new features into the economy reveals new channels and mechanisms that are overlooked in simple models. Therefore, my model provides a more accurate way to predict economic movements. Furthermore, this thesis documents the importance of macroprudential policy regulations in financial stability, sustainability, and welfare. Finally, in the last two chapters of my dissertation, I turn to the study of advanced markets and focus on developing economies.These chapters build new models and address various economic issues related to the financial, public, and labor economies in developing countries through the prism of heterogeneous agent EGD models.I examine the impacts of real, monetary, fiscal, and oil shocks on the economic environment of developing countries. I then propose policy recommendations.