The study explores how financial constraints affect unemployment and capital allocation in the economy. Vacancy costs tied to credit markets can impact job creation and wages during economic cycles. The model shows that easing credit constraints can lead to more job openings and lower wage pressures. Additionally, the research finds that there is time-varying congestion in the allocation of physical capital, but credit market frictions have a limited impact on business cycle fluctuations. The study also examines foreign direct investment flows between countries and how capital allocation abroad can be influenced by search frictions.