This one-of-a-kind text examines the role that financial markets and institutions play in modern macroeconomics. Traditional economics downplays the function of financial systems in macroeconomic thought. Recently, however, economists have increasingly begun turning to microeconomic models of market failure in an effort to explain business cycles and other macroeconomic phenomena. Here, author David Knoop offers a non-technical review of the new advances critical to understanding the macroeconomic impact of financial systems. Particular attention is paid to the role that these systems play in economic instability and to the causes of recessions and depressions in the US and abroad. For the first time, significant developments made in the field of financial macroeconomics over the past decade are outlined. Written in an accessible style, Modern Financial Macroeconomics will appeal to both university students and anyone interested in modern financial developments.