Full text of Economic Synopses : Stag-nations, 2002, No. 2

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

Economic SYNOPSES
short essays and reports on the economic issues of the day
2002 ■ Number 2

Stag-nations
James B. Bullard
conomic growth in the United States has slowed
The synchronized nature of this downturn may be less
substantially since the days of rapid expansion during
grave than some contend, however. It is true that U.S. firms
the mid to late 1990s. According to preliminary
will be able to sell fewer goods and services to foreign buyers
estimates, growth in real gross domestic product (GDP)
if foreign economies are slumping, but the U.S. is still a
turned negative in the third quarter of 2001 and is projected
relatively closed economy. Even after the dramatic expanto return slowly to its previous pace during 2002. Observers
sion of trade associated with “globalization” in the 1990s,
of the U.S. economy sometimes argue that deteriorating
the U.S. export-to-GDP ratio was about 12 percent as of
economic performance abroad is a risk in the current down2000. Thus, the cross-border trade effects are small relative
turn. If the economic downturn were limited to the U.S.,
to domestic economic activity. For this reason, the fact that
continued demand for U.S. exports abroad might be
the big three economies are slumping together is less of a
expected to help stabilize American income and employconcern. ■
ment. But, unfortunately, the world’s three largest economies
appear to be slumping simultaneously. Is this a problem
inhibiting U.S. economic recovery?
The Figure shows growth rates of real GDP in the U.S.,
Japan, and Europe from the first quarter of 1996 through
the fourth quarter of 2001. (Europe is defined as the uniStag-nations
fied GDP of the countries in the Euro zone as of 1999.)
To reduce clutter, the data are smoothed by taking a fiveReal GDP Growth, Major Economies, Five-Quarter Centered
Moving Average
quarter centered moving average of annualized percentage growth rates. For observations near the end of the
5
period and into 2002 that are not yet available, forecasts
USA
from the Blue Chip Economic Indicators were used for
4
the U.S., and forecasts from the OECD Economic
Outlook were used for Europe and Japan.
3
Of the big three, the U.S. has been the best performer
during most of the period, with average rates of growth
2
Europe
exceeding 4 percent during much of the late 1990s. How 1
ever, average growth rates have fallen sharply since the
second half of 2000. Japan has been the worst-performing
0
economy according to these data, with growth generally
slow and often negative. The worst outcomes for Japan
–1
occurred during the Asian currency crisis in 1997 and
Japan
1998. After recovering during 1999 and 2000, Japan has
–2
again moved into recession. Europe has been a less vola 1997.1
1998.1
1999.1
2000.1
2001.1
1996.1
tile performer. But, since average rates of growth peaked
Quarter
in late 1999 and early 2000, European growth has slowed
SOURCES: Haver Analytics, Blue Chip Economic Indicators, and OECD Economic Outlook.
as well. Thus, the world’s three largest economies are slowing simultaneously for the first time in recent memory.
Annualized Percentage Growth Rate

E

Views expressed do not necessarily reflect official positions of the Federal Reserve System.

research.stlouisfed.org