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Study: US Economy Fueled 1990s Global Expansion

The U.S. economy's ups and downs have a powerful impact on the rest of the world, according to a study by two economists at the International Monetary Fund. The study concludes the United States' boom helped power the global expansion of the 1990's.

Economist Vivek Arora says he and his partner, Athanasios Vamvakidis first looked at the impact U.S. economic growth has had on world growth in general.

"If you look at expansion of world GDP in the last 20 years, the United States accounted for about 20 percent of that expansion, and for about a quarter of the expansion of the 1990s. So these are just very big numbers which suggest that the United States has a very large share in world growth, and a change in U.S. growth should have a very large impact on world growth," he says.

The bulk of the economists' study is a statistical attempt to quantify the precise impact United States' growth has on other countries. They looked at two decades of data for 170 countries.

What they found, Vivek Arora says, is that an increase, or decrease, of one-percentage point in the growth of U.S. per capita output was associated with a one-percentage point increase, or decrease, in the average growth of other countries.

"What did not surprise us is that the U.S. had a significant impact. What I think was surprising was the extent to which it matters. I think the finding that one-percentage of U.S. growth is reflected in a one-percentage-point change. That is a one for one impact, I think that was a striking finding," Mr. Arora says.

Athanasios Vamvakidis says developing countries are especially sensitive to U.S. ups and downs.

He says the statistics indicate the United States has a greater impact on global growth than the European Union, and a much greater impact than Japan.

"Japan does not seem to be an engine of world growth and that may be because although Japan is an important trading partner in Asia, Japan is not an important trading partner with the world economy as a whole," he says.

The United States, on the other hand, is the world's biggest trading partner. Mr. Vamvakidis says trade is key to the United States' economic influence. "The United States, for about 50 countries out of a sample of 100 countries, is the number one trading partner, and for all the other countries, the U.S. is always one of the top-four trading partners," he says.

The United States is both the world's biggest export market and a major seller of high technology items. Both characteristics, Mr. Vamvakidis says, contribute to economic growth in other countries.