united kingdom. the weights are proportional to u. s. dollar - denominated gdp computed at market exchange rates. growth in industrialized countries went from about 3 - 1 / 2 percent to 1 - 1 / 2 percent, then recovered only to 1 - 3 / 4 percent. the recovery in the other industrialized countries took longer than in the united states, with growth picking up further after 2004, but the pattern was broadly similar. the emerging market economies aggregate is based on the real gdp growth rates of argentina, brazil, chile, china, colombia, hong kong, india, indonesia, korea, malaysia, mexico, peru, the philippines, russia, singapore, south africa, taiwan, thailand, turkey, and venezuela with the same weighting scheme as that used for industrial countries. doyle and faust ( 2005 ). kose, otrok, and prasad ( 2008 ). the other dimension of recent linkages is financial, where the evidence is clearer. first, few question the importance of financial linkages between the united states and other industrial economies, which is an area where decoupling clearly has not occurred during the recent episode. while industrial country markets for stocks and bonds have displayed a high degree of co - movement for years, in the current episode we are seeing notable new correlations across money markets, with disruptions in funding markets showing up in the euro area, switzerland, the united kingdom, and canada, as well as in the united states. some of the effects of the u. s. subprime mortgage crisis on financial markets in these countries occurred as a result of direct or indirect balance sheet exposures by their financial institutions to u. s. securities. other adverse consequences for foreign financial institutions occurred when entire markets, such as that for asset - backed commercial paper, became impaired. in contrast, some have pointed to the apparent resilience of financial conditions in emerging market economies during the past year as an example of decoupling. in particular, the disruptions in the advanced economies have had only limited impacts on money markets in emerging market economies, and other financial market indicators in emerging market economies appear to have held up relatively well. for example, the spreads of emerging market sovereign bond yields over u. s. treasury securities have risen since june of last year, but by only about 1 / 3 of the rise in the average u. s. corporate high - yield spread over u. s. treasury securities. that rise is roughly half the average in several previous

recent divergences of economic performance reflect a particular set of shocks that have hit the global economy, as well as changes in the way that different economies have responded to those shocks. as our global economy becomes more intertwined and complex, the nature and transmission of business cycles and the associated policy responses will no doubt continue to evolve. economies benefit from having independent monetary policies that provide room to respond flexibly to alternative configurations of economic and financial shocks. these benefits could be increased if exchange rate flexibility were to become more widespread and monetary policies given greater latitude to respond to shocks wherever they originate. references bayoumi, tamim, and andrew swiston ( 2007 ). " foreign entanglements : estimating the source and size of spillovers across industrial countries ( 692 kb pdf ) ", imf working paper 07 / 182. washington : international monetary fund, july. catao, luis, and allan timmermann ( 2004 ). " country and industry dynamics in stock returns ", cepr discussion paper 4368. london : centre for economic policy research, april. cetorelli, nicola, and linda goldberg ( 2008 ). " banking globalization, monetary transmission and the lending channel ( 250 kb pdf ) ", nber working paper series 14101. cambridge, mass. : national bureau of economic research, june. corrado, carol, paul lengermann, and larry slifman ( 2007 ). " the contribution of multinational corporations to u. s. productivity growth, 1977 - 2000, " finance and economics discussion series 2007 - 21. washington : board of governors of the federal reserve system, november. doyle, brian, and jon faust ( 2005 ). " breaks in the variability and comovement of g - 7 economic growth ", review of economics and statistics, vol. 87 ( november ), pp. 721 - 40. federal reserve bank of atlanta ( 2008 ). overview from the conference entitled " remittances and the macroeconomy, " february 21 - 22. imbs, jean ( 2004 ). " trade, finance, specialization, and synchronization ", review of economics and statistics, vol. 86 ( august ), pp. 723 - 34. hummels, david ( forthcoming ). " transportation costs and international trade in the second era of globalization, " journal of economic perspectives. international monetary fund, statistics department ( 1986 - 2007 ). direction of trade statistics yearbook. washington : international monetary