LEVEL OF EXPOSURE TO GLOBAL TRADE FLOWS: WHERE DOES THE U.S. ECONOMY STAND?

Using the cointegration model and Granger causality, this paper explains how trade flows affected the U.S. economy via consumption expenditures in the 1960-93 subperiod. However, trade flows did not significantly affect the U.S. economy in the 1994-98 subperiod because consumption expenditures weakly caused U.S. gross domestic product. Therefore, currency crises in Latin America and East Asia did not produce any negative effects on the U.S. economy in the late 1990s. Thus, high productivity in the technology sector, low petroleum prices due in part to low demand in Asia, massive influx of foreign capital largely from Asia to the United States, and cheap imported goods from Asia helped the U.S. economy shrug off these currency crises in the late 1990s.