This thesis consists of three essays on International Macroeconomics with labor market frictions. The first chapter addresses the international co-movement of employment by introducing labor market search frictions along with real wage rigidity into a two-country economy. I show that search and matching frictions in the labor market, combined with wage rigidity account for the positive cross-country correlation of employment as well as labor market activity within a country. With search and matching frictions in the labor market, higher productivity in the home country leads home and foreign employment to rise even at the initial period before productivity shocks spill over. When demand for foreign goods is predicted to rise, foreign firms have an incentive to hire workers in advance in response to the higher expected payoff to a job because hiring takes time and costs. The second chapter examines a Ramsey-type optimal monetary policy in an open economy with a two-country dynamic general equilibrium model where search and matching frictions exist in labor markets along with the limited participation in financial markets. Monetary policy affects the decision of firms in labor markets because firms finance their wage bills with loans from domestic financial intermediaries in advance. There are two main results associated with optimal monetary policy. The long-run optimal nominal interest rate is zero suggesting deflation because the terms of trade effect on consumption is weaker by search and matching frictions in the labor market. As a result of the Ramsey optimal monetary policy, dynamics of business cycles in both countries show similar patterns in response to productivity shocks and, in turn, higher cross-country correlations of real variables. In my third chapter, I explore how a country-specific productivity shock generates deviations of the LOP in an open economy by introducing search frictions in labor and goods markets. First, I express the LOP gap by the ratio of marginal utility of aggregate search efforts across countries. Then I show that the LOP gap is expressed in terms of relative aggregate consumption across countries by examining the relationship between the aggregate search efforts and the aggregate consumption. I find that a country-specific productivity shock generates deviations of LOP through the link between aggregate consumption and aggregate productivity. If a country-specific productivity shock occurs in the home country, then households in the home country exert more search efforts to consume more goods, which entails the difference of matching probabilities of firms between the domestic and the export markets. Since aggregate productivity and marginal costs of posting vacancies are the same across markets, difference in matching probabilities between markets let firms operating in each market offer different prices. Finally, I study responses of macroeconomic variables to a positive productivity shock in the home economy. I find the two-search model delivers consistent correlations with data, in terms of crosscountry correlations of output and consumption, and a negative correlation between the terms of trade and the relative output when taking into account productivity shocks along with preference shocks.