The Sneezing U.S. Economy

When the U.S. economy sneezes, does the world catch a cold? It has been interesting watching increasing (non-China) market correlations in the last month or so, but the underlying economies themselves are something else. When & how do they move together, and how has that changed over recent decades? And is China’s economy becoming more or less correlated with that of the U.S.?

The answer, courtesy of a fascinating new ECB paper:

The correlations are generally high, with the U.S. economy leading the rest of the world, with the exception of the nutty period between 1995 and 2002 when the U.S. was off in economic lala land. Some more interesting factoids from the paper:

  • The U.S. contribution to world growth has shrunk from 30% in 1950 to 20% today
  • The Asian correlation is considerably lower than the rest of the world, with it increasingly marching to the beat of its own economic drum


  1. Paul, I think your posts on private equity and US economics are the best. Keep up the good work, the world needs more bloggers with quality, and I am tired of reading economics professors’ blogs 😉

  2. Thanks F(r)azier. Appreciate the kind words. I’ve been doing more on the subject lately, letting out my inner non-economist, as it were.