The first chapter explores the real-side consequences of financial fragility during systemic credit misallocation episodes. Focusing on India’s 2008–2015 regulatory forbearance period, I quantify the productivity costs of credit misallocation induced by banking sector distress. Combining firm-level panel data with bank-firm lending relationships, I document a breakdown in allocative efficiency as capital was increasingly directed toward zombie firms. Exploiting plausibly exogenous heterogeneity in pre-crisis bank health, I find that exposure to weaker banks significantly dampened firm investment and productivity growth, with adverse spillovers to industry-level performance. The analysis reveals that nearly 56% of aggregate productivity losses during this period can be traced to misallocated credit stemming from impaired banks. Together, the two chapters illuminate the financial roots of macroeconomic fragility and underscore the critical role of both external and internal channels in shaping emerging market responses to global and domestic financial shocks. The second chapter introduces a novel, high-frequency cross-country index of financial uncertainty spanning 72 economies from 2000–2023. Using local projection methods, I show that countries with elevated prior domestic uncertainty and high trade exposure to uncertain partners experience amplified and persistent declines in equity valuations, sharper currency depreciations, and wider sovereign bond spreads in response to global financial shocks. The amplification is highly state-contingent: countries with sound macroeconomic fundamentals exhibit swift but temporary adjustments, while fragile economies face prolonged asset stress due to weaker buffers and impaired policy credibility. Disaggregating uncertainty into advanced and emerging market components reveals divergent channels of transmission, with export dependence—rather than import exposure—emerging as a key vector of shock propagation. The third chapter is based on paper that has been co-authored with three economists from the IMF - Divya Kirti, Damien Capelle, Eduardo Espuny Diaz and German Villegas Bauer. This chapter investigates how financial frictions shape firm-level emissions and the effectiveness of climate mitigation policies. Empirically, it establishes that firms with lower net worth are less productive, more emission-intensive, and respond less to carbon pricing. To interpret these findings, the authors develop a dynamic heterogeneous-firm general equilibrium model with financial constraints and endogenous adoption of capital vintages that vary in emission efficiency and productivity. Calibrated to microdata from European manufacturing firms in the EU Emissions Trading Scheme (EU ETS), the model replicates key empirical patterns and demonstrates that financial frictions amplify the economic costs of carbon pricing by slowing firm growth and deterring entry. While green-oriented financial policies can accelerate adoption of cleaner technologies, they tend to raise total emissions in general equilibrium due to associated GDP expansion. Counterfactuals show that relaxing financial constraints—even with a green bias—does not necessarily reduce emissions unless paired with carbon pricing, and doing so comes at a cost to economic output. The paper highlights novel macroeconomic channels—such as slower net worth accumulation and reduced entry—through which financial frictions magnify the transitional and long-run costs of climate policy.