The Impact of Globalization on the U.S. Business Cycle: Technical Paper 1999-6
Working Paper
This paper investigates whether the U.S. has become more globalized and if so whether that increased globalization has helped hold down inflation and prolong the current economic expansion.
This paper investigates whether the U.S. has become more globalized and if so whether that increased globalization has helped hold down inflation and prolong the current economic expansion. We find that U.S. globalization, which has been rising significantly over the past four decades, surged beyond its earlier trend in the 1990s. Import prices exert a greater impact on prices of products in industries faced with greater import penetration. High foreign excess capacity accounts for much of the recent decline in U.S. inflation. Finally, the degree of business cycle synchronization appears to influence the duration of business cycles. Synchronized cycles are shorter than asynchronized cycles. Our findings suggest that foreign recessions have enhanced the role of globalization in sustaining the current expansion; however, globalization alone could have shortened, not lengthened, the current expansion if it were synchronized with foreign expansions.
