The 2007 - 2009 financial crisis shows the importance of financial shocks and financial market integration as a transmission mechanism between countries. My dissertation investigates spillover effects in the integrated financial market. The first two chapters find that transmission of financial shocks can differ dramatically depending on the type of financial market integration, in particular, on the distinction between integration in the short-term debt versus long-term debt markets. The third chapter examines the domino effects of spillovers in the global banking system. The first chapter investigates the role of different types of financial integration in transmitting a country-specific financial shock. I develop a two-country DSGE model in which the financial market is divided into the short-term debt and long-term debt markets. The dominant effect differs in the short-term debt and long-term debt market in the presence of the financial shock. The financial accelerator operating in the short-term debt market leads to a negative spillover, while efficient allocation of investment working through the long-term debt market leads to a positive spillover. The second chapter shows the empirical evidence that supports the theoretical result of the first chapter. Empirical estimates show that short-term debt market integration is associated with a negative spillover effect on output in other countries, whereas long-term debt market integration is associated with a positive spillover effect on foreign output in the presence of negative financial shocks. This result explains the ambiguous result of past empirical studies that did not distinguish between different types of assets. The third chapter suggests the vulnerability index of 20 countries constructed by a network analysis. This index shows how vulnerable each banking system is with respect to a country-specific financial shock in the global banking system. The vulnerability index in most of the countries in the dataset has declined over the past five years, and this has real effects on output. During boom periods, the vulnerability index is associated with significant positive GDP growth surprises. During crisis times, the vulnerability index is associated with significant negative GDP growth surprises.