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The Influence of the Foreign Direct Investments on USA's GDP
Introduction
This paper aims to examine an American case study in which the foreign direct investments (FDI) influence the country’s gross domestic product (GDP). This study covers a 25-year period from 1980 to 2005. The paper attempts to determine the empirical influences of foreign direct investments on the GDP of the United States of America using the macroeconomic annual data. Foreign direct investment is the act of business entities in a foreign country having controls over some stake or wholly owns an enterprise in another country. The World Bank consequently describes it as the net investment inflows acquired by a business enterprise to affect a long-term management interest, which in many countries stand at least 10 percent of a company’s voting stock. However, for the investment to qualify as a foreign direct investment its origin must remain different from the natural economy of the investor (Moran). The bank also describes it as the sum total of both short-term and long-term capital investments, reinvestment of earning, and equity capital foreign in nature that appears in the balance of payments of an enterprise. Employment, domestic investments, national human capital, the country’s exports, and foreign direct investments form the basis of the endogenous parameters for the determination of the national gross domestic product growth. The study employs therein multiple regressions in its analysis. Even though foreign direct investments are the driving engines of many economies of the world, this paper finds that the economy of the United States thrives in addition to FDI inflows. Consequently, there is minimal influences influence of the foreign direct investments on the economic growth of USA (Bobonis and Shatz 30-43). In the past four years, its influence on the GDP of the United States stands at less than 2 percent annually. It was only 1.7 percent in 2011, before dipping further to 1.3 percent in the subsequent year. In 2013, it shot up again to 1.7 percent, which in monetary terms translated to US $2.8 trillion, but in 2014, it stood at just 0.8 percent of the GDP.
The impacts of foreign direct investments for a long time continue to interest economists the world over. Consequently, in the new growth theory of economies, FDIs are an integral aspect of economic growth engine as it transfers technology to economies, and is instrumental in the human capital efficiency improvements. Economics scholars argue that FDIs channel advanced technologies to recipient nations, and thereby spur economic growth of those countries. The managerial skills, the marketing techniques, and the advanced technologies give “contagion effect” to the host nation. In addition, the host nations often export the FDIs outputs to developing economies, and thereby accelerate economic growth of these countries. As FDIs influence both exports and imports of a host nation, the latter benefits from exports that depend on foreign direct investments (Berthélemy and Demurger 140-155).
FDI World Trends
In recent years, foreign firms target their investments more in emerging and transition economies. However, despite the trend, the total inward investment in the third world economies is still far less in comparison to the foreign direct investments in developed economies of the world (Berthélemy and Demurger 140-155). Consequently, among the transition economies of Commonwealth of Independent States, southern and Eastern European nations, the Russian Federation included, the foreign investment rose to four percent by 2013 up from a mere one percent in the year 2000. Over this period however, the developing markets attracted the largest chunks of the inward FDIs, totalling one third over the same period, with Brazil at 3 percent of these investments, and China occupying 4 percent.
Past Researches on FDI in the USA
In their 2014 report under the title, “Foreign Direct Investment in the United States” the Washington DC based Organization for International Investment asserts that in 2013 alone, foreign organizations invested a total of U.S $236 billion into the economy of the United States. This was a 35 percent increase from the previous year. Consequently, it was the country’s third best year in terms of foreign direct investment in the last decade. Equity was responsible for much of the increase that rose up by U.S $33 billion compared to 2012. However, reinvestment of profits only arose marginally. According to a report in the same year by another Washington DC team operating under the banner of Content First, by the title “Cumulative Foreign Direct Investment in the United States, 2009 - 2013,” the cumulative foreign direct invests in the country continue to rise steadily over the past few years. It was U.S $2.1 trillion in 2009 before rising to 2.3 trillion in the following year. In 2011, it only rose marginally to U.S $2.4 trillion (Pao and Tsai 685-693). However, the cumulative foreign direct investments stood at US $ 2.6 trillion before shooting up to US $ 2.8 trillion in 2013.
According to a report by World Bank in 2013 under the title “Worldwide Inward Stock of Foreign Direct Investment, 2000 and 2013,” the United States holds only 19 percent of the world’s total inward FDIs. However, this was an increase of 17 percent from 2012. The contrary picture is that American firms account for about 33 percent of the world’s inward FDIs to other nations of the world (Walsh and Yu 1-27). This however, is slightly lower than the European Union companies that account for 34 percent of the world’s FDIs. This represents a 3-percentage point increase from the year 2000. In monetary terms, the yearly foreign investments in the United States rose from U.S $64 billion in 2003 to $ 236 billion in 2013. However, over the decade, the peak of American foreign direct investments was in 2008 where these investments stood at U.S $310 billion.
Another report by the bank published in 2013 under the title “Cumulative Foreign Direct Investment in the United States by Country Through 2013” show that only eight nations account for 80 percent of foreign direct investments in the United States (Pao and Tsai 685-693). Among these, the leading investors are the British companies whose total investments stand at U.S $519 billion. The next high investments are those of the Japanese firms whose investments stand at $342 billion. In the third place are the Dutch firms whose companies have a total investment of $274 billion in the United States, while Canadian companies occupy the fourth place with a total investment of U.S $238 billion. In the fifth position are the French companies with a total investment stand at $226 billion. Swiss companies occupy position six with an investment of U.S $209 billion. Similarly, the Germans equally have the same level of investments in the United States, while Luxembourg companies occupy position eight with a total investment of U.S $202 billion. The remaining countries of the world have a total investment of U.S $ 545 billion in USA. However, in 2013 Japan ranked the highest foreign direct investor in the United States with a total investment of close to U.S $45 billion. Over this time, Ireland’s $15 billion gave it position six in the leading foreign investors in the United States. China held a distant position 14 with an investment of 2.4 billion in the USA. This was a significant drop of 31 percent compared to the previous year.
According to another report by World Bank published in 2013 under the title “Cumulative FDIUS by Industry 2013,” chemical industries top foreign direct investments in the USA with a total portfolio of U.S $280 billion investment. In the second place is the transportation equipment with an investment of $110 billion. In the third place are the petroleum and coal product companies whose total investments equal $108 billion. Machinery firms’ investments throughout 2013 stood at 87 billion, while non-metallic mineral products companies account for $55 billion of the foreign direct investments in the United States. Primary and fabricated metal companies account for $53 billion of the foreign direct investments at position six, while food and beverages firms come in next with a contribution of $51 billion. In position 8, are the computers and electronic goods companies with a net foreign direct investment totalling U.S $49 billion. Appliances, electrical equipment and accessories account for $47 billion of the foreign direct investments at position nine, while other manufacturing companies have a $93 billion foreign direct investment in the United States by 2013 (Quer, Claver and Rienda 1089-1104).
According to the White House 2013 report prepared by the Council of Economic Advisers to the President and the Department of Economics under the title “Foreign Direct Investment in the United States,” the United States is now among the world’s largest recipients of foreign direct investments from the year 2006 (Makino and Tsang 545-557). The department maintains that the net assets of foreign investors in the United States stood at U.S $3.9 trillion by 2012. In the same year, the inward flow of foreign direct investments was $166 billion. The department states that foreign direct investments in the United States comes from a limited number of developed nations that include a total of seven European nations, Japan, Korea, Australia, and Canada. Albeit still in minute quantities, the White House maintains that inflows from emerging economies like Brazil and China are on the rise by the day. According to the Bureau of Economic Analysis report also of 2013, and by the title “Foreign Direct Investment in the United States is Substantial,” by the year 2011 foreign direct investors held 4.7 percent of the output volumes in the private sector. Consequently, this translated to 4.1 percent of the private sector employment, or about 5.6 million people in real terms. In terms of total investments, the foreign direct investments account for 9.6 percent in the United States, and are responsible for 15.9 percent of private development and research in the country (Moran).
The Economics and Statistics Administration in their 2009 report under the title “Foreign direct investment benefits the U.S. Economy” assert that during the 2008 to 2009 recession, and the subsequent recovery under the Obama administration, employment remained rather stable in the foreign direct investments firms than the overall private-sector employment. Consequently, the foreign direct investors’ share in employment in the manufacturing sector rose from the 2007’s 14.8 percent to near 18 percent by the year 2011 (Walsh and Yu 1-27). The department also maintain that USA foreign investors continue to earn higher returns on investments than the average American companies do. Consequently, according to the 2013 Federation of American Scientist under the title “Foreign Direct Investment in the United States” in the nation’s forecasts, this country remains in a strategic position to continue attracting high foreign direct investments, and this will continue to boost the nation’s economy. Therefore, there is an urgent need to continue to foster and strengthen the underlying economic foundations of the country that make it an attractive investment destination. These include transparent investment departments, the nation’s largest economy in the world, a large market base second only to China in the world, world renown universities and community colleges churning out skilled labour force to the economy, world-class infrastructure, vast energy resources, and a stable and therefore predictable regulatory authorities.
The United States Department of Commerce business investment report of 2013 titled “Foreign Direct Investment (FDI) in the United States: Drivers of U.S. Economic Competitiveness,” the paper posits that FDI is a critical source of innovation, international trade, employment generation, and capital injection to economy (Ramasamy and Yeung 573-596). Consequently, FDI continue to flow into the country because businesses worldwide know that the United States is a powerhouse of innovation and whose market is stable in addition to being the world’s largest economy. Coupled with the nation’s longstanding transparent investment policy that recognizes that unhindered movement of capital investment across the globe is critical to global economic development, the nation is highly optimistic to attract more foreign direct investment. Consequently, the Location USA 2015 report titled “How U.S. States are Targeting Foreign Direct Investment,” regional, State and federal economic development organizations are actively involved in the development of a number of innovative strategies to improve business environment, build lasting relationships, and promote their best assets to the world in order to attract FDI to the United States.
On the other hand, the 2015 Brookings Institution paper titled, “Using Foreign Direct Investment to Strengthen U.S. Advanced Industries” asserts that a recent research by the organization indicated that the advanced industries, which are a collection of 50 industries that span energy, services, and the manufacturing sector. The same companies also share a special commitment to the use of research and development, and reliance on STEM-skilled labour force; drives the American economy through innovation and inclusiveness to prosperity. Consequently, in half of the leading 100 foreign companies in the American cities account for larger proportions of advanced industry jobs than the national average. Therefore, Mack Ott’s 1990 paper titled, “Foreign Investment in the United States” in The Concise Encyclopaedia of Economics assert that between 1982 and 1990 the current account deficits for the United States stood at above U.S $900 billion (Makino and Tsang 545-557). Current account deficit is the difference between monetary values of total imported goods and services together with a country’s foreign aid and the country’s exported goods and services. The net capital inflows from foreign direct investments finance these current account deficits in the United States. However, although the United States holdings of foreign assets shot up during this period, foreign holding of USA assets went up by more than U.S $900 billion. In this regard, the net difference between the United States assets abroad and the foreign direct assets in the country dipped to the negative levels in the year 1985 for the very first time since the onset of World War II in 1914.
FDI and GDP Growth in the USA
All the above institutions and government departments uses empirical research methods to arrive at the conclusions made. In same light, this section of the paper applies a synthesis of empirical research methodology to evaluate the influence of the foreign direct investments on the GDP of the United States during the period that ranges from the year 1980 to 2005. The concept of FDI has its origins in the 1950s when a number of international companies, commonly referred to as multinational corporations (MNCs), took the initiative and acquired foreign businesses or formed mergers with the foreign companies. One can explain FDI based either on one of the two key frameworks namely, the OLI Paradigm or strategic motives of the MNCs (Arauzo‐Carod, Liviano‐Solis, and Manjón‐Antolín 686-711). In the OLI hypothesis, the character “O” stands for the owner-specific advantages in the investor’s home market, while the character “L” stands for location-specific in the foreign markets, and “I” is an acronym for internalization through which the international corporations control an industry’s value chain. On the other hand, strategic motives refers to companies who in the process of foreign investments empower them to become MNCs through reaching out for new markets, improved knowledge, additional raw material, political protections or security, and production efficiency. These firms often operate as oligopolies, and the MNCs’ FDI encompasses managerial roles for a number of companies. They may also operate for economic reasons within the fore mentioned frameworks, and often their operational designs are for sustainable performances in the end.
Consequently, the United States as the world’s largest economy continue to attract, on a cumulative basis, an increasing volumes of FDI more than any other nation in the world (Alguacil, Cuadros, and Orts 481-496). While economic size determines foreign direct inflows, other factors also influence the direction of foreign investment flows. These include the economic state of a country, its political stability, how open and welcoming the government departments are to foreign investors, the level of skill in the population, flexibility and productivity levels of the labour force. Other factors to consider are the ratings of academic and research institutions on the land, adherence to patent laws, how supportive governmental policies are, and how advanced its financial or capital markets operate. In this regard, this paper seeks to determine the extent the economic growth and by extension the GDP, the national outputs and the labour force in the United States profited from the increased FDI inflows from the period ranging from 1980 to 2003. Consequently, a number of factors motivate this study. First, virtually all the States of USA have excellent educational institutions that give the American labour market individuals with internationally accredited training, skills, and knowledge. Therefore, this continues to sustain foreign direct investor presence in the United States. Secondly, the incomes particularly of the highly skilled labour force improve year after year in the phase of continual FDI inflows to the country. Finally, the spread of globalization through the economies of the world resulting in greater integration, it becomes critical for the United States to improve the living standards of many of its citizens in comparison to other nations through a sustainable economic growth. Therefore, the country must continue to strategically attract more FDI to sustain its economic growth. Consequently, this paper devotes much of its discussion to this point through the available empirical data to support this argument.
Empirical Research Methodology Input
Based on 1980-2005 annual data, Panel A in Table 1 outlines the computed inflow and outflow data and their corresponding ratios. The 1980s to 1990sshow a decline in these ratios. However, an upward trend is noticeable from the middle to late 1990s as FDI inflows increased in the United States. According to the world investment report by UNCTAD, there was a worldwide decline in FDI inflows the world over in the year 2001 to 2002 (Berthélemy and Demurger 140-155). This appears in the U.S data, and still in 2003 the FDI inflows to USA was yet to recover. In the years 2004 to 2005, both FDI inflows and outflows increased. In Panel B of Table 1, an upward trend emerges in the ratio of the FDI’s inward to outward stocks. This demonstrates a positives trend in the long-term positive as seen in Panel C of Table 1.
Year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
PanelA
Inflows 45.0 58.7 84.4 103.4 174.4 283.3 314.0 159.4 62.8 52.7 136 105
Outflows 73.2 92.0 84.4 95.7 131.0 174.5 142.6 124.8 115.3 151.8 295 15
Ratio 0.61 0.63 1.00 1.08 1.33 1.62 2.20 1.27 0.54 0.35 0.46 7

PanelB
Inward Stock

480.6

535.5

598.0

681.8

778.4

955.7

1,214.2

1,321.0

1,505.1

1,553.9 2,717 2,818
OutwardStock 612.9 699.0 795.2 871.3 1,000.7 1,173.1 1,293.4 1,381.6 1,839.9 2,069.9 3,363 3,638
Ratio 0.78 0.76 0.75 0.78 0.77 0.81 0.93 0.95 0.81 0.75 0.81 0.77
Panel C: Inward Stock: FDI/GNP
0.068
0.072
0.076
0.081
0.088
0.102
0.123
0.129
0.143
0.140 0.200 0.12
FDI/TNWNC-M 0.091 0.093 0.094 0.096 0.103 0.116 0.130 0.143 0.159 0.152 0.168 0.156
FDI/TNWNC-Hb 0.135 0.136 0.137 0.143 0.147 0.162 0.179 0.190 0.214 0.204 0.221 0.208
Memoranda:
GNP
7,071
7,421
7,831
8,325
8,778
9,297
9,848
10,172
10,499
11,040/12,275/13,094
TNWMC-M 5,255 5,726 6,346 7,052 7,510 8,192 9,326 9,217 9,427 10,199 11,123 12,21 12,213
TNWMC-H 3,563 3,928 4,354 4,768 5,289 5,889 6,785 6,918 7,039 7,619 7,982 8,045


Table 1: Foreign Direct Investment in the U.S in billions of dollars andworked percentages

Year 1980 1981 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
PanelA
Inflows 16.9 25.1 13.8 11.5 25.5 20.5 36.1 59.5 58.5 69.0 48.4 22.8 19.2 50.6
Outflows 19.2 13.2 1.0 9.5 13.0 13.4 19.6 30.1 18.6 37.6 31.0 32.7 42.6 77.2
Ratio 0.88 1.90 13.8 1.21 1.96 1.53 1.84 1.97 3.14 1.83 1.56 0.69 0.45 0.65
PanelB
Inward Stock 83.0 108.7
124.6
137.0
164.5
184.6
220.4
263.4
314.7
368.9
394.9
419.1
423.1
467.4
Outward Stock 215.3 220.4 207.7 212.1 218.0 238.3 270.4 326.2 347.1 381.7 430.5 467.8 502.0 564.2
Ratio 0.38 0.49 0.60 0.64 0.75 0.77 0.81 0.80 0.90 0.96 0.91 0.89 0.84 0.82

Panel C: InwardStock:
FDI/GNP 0.029 0.034 0.037 0.038 0.041 0.043 0.049 0.055 0.061 0.067 0.067 0.069 0.066 0.070
FDI/TNWNC-M 0.026 0.031 0.034 0.035 0.040 0.044 0.051 0.058 0.065 0.073 0.078 0.087 0.091 0.095
FDI/TNWNC-Hb 0.058 0.069 0.080 0.080 0.081 0.085 0.096 0.108 0.121 0.137 0.142 0.142 0.141 0.142
Memoranda
GNP
2,831
3,166
3,296
3,572
3,968
4,238
4,468
4,756
5,127
5,509
5,832
6,011
6,342
6,667
TNWNC-M 3,148 3,511 3,671 3,828 4,064 4,167 4,308 4,517 4,826 5,032 5,025 4,776 4,635 4,899
TNWNC-H 1,412 1,563 1,664 1,849 2,046 2,165 2,288 2,437 2,602 2,678 2,773 2,934 3,000 3,282

Table 2: FDI Influence in the Economy of USA in billions and percentages

Year M & A Establishments US mfg assets Exports GNP Value-Added
1980 9.0 3.2 5.9 2.7 2.5 3.3
1981 18.2 5.1 7.8 3.1 3.1 4.2
1982 6.6 4.3 8.0 3.2 3.1 4.3
1983 4.8 3.2 8.2 3.3 3.1 4.2
1984 11.8 3.4 8.3 3.4 3.2 4.4
1985 20.5 3.0 8.8 3.4 3.2 4.3
1986 31.5 7.7 9.5 3.5 3.2 4.3
1987 33.9 6.












4 10.5 3.7 3.3 4.4
1988 64.9 7.8 12.6 3.5 3.1 3.8
1989 59.7 11.5 14.9 3.9 3.0 4.0
1990 55.3 10.6 16.4 4.2 3.2 4.3
1991 17.8 7.7 16.9 4.4 3.3 4.6
1992 10.6 4.7 17.0 4.3 3.3 4.5
1993 21.7 4.4 17.6 4.1 3.3 4.4
1994 38.7 6.8 17.9 4.1 3.4 4.5
1995 47.2 10.2 17.6 4.0 3.4 4.5
1996 69.7 11.2 17.3 4.1 3.6 4.6
1997 60.8 9.0 18.3 4.1 3.7 4.9
1998 182.3 32.9 21.9 4.3 4.0 5.2
1999 265.1 9.8 23.0 4.6 4.2 5.6
2000 322.7 12.9 22.8 5.0 4.5 5.9
2001 138.0 9.0 24.2 4.9 4.1 5.4
2002 43.4 11.0 21.1 4.9 4.3 5.8
2003 50.2 13.3 20.7 4.7 4.4 5.8
2004 57.0 35.6 24.0 4.3 4.8 6.1
2005 70.8 15,1 21.4 4,1 4.3 5.7


Time-Series Analysis
To evaluate the link that exists in foreign direct investment inflows and GDP growth, one uses a standard production function that consists of assumed labour and capital, where physical capital encompasses both foreign and domestic inputs (Durbin and Koopman). In the use of the model, the ‘linearity hypothesis’ argues that any external attributes and spillages that the FDI capital inflows induces and the accumulation must result in a higher output growth for an economy. Consequently, this demands for an investigation to ascertain the degree of complementarily or the substitutability of FDI into domestic businesses. To evaluate the relationships empirically, an individual must assess how FDI affects output growth rates, and equally determine the relationship between the total factors of productivity and capital stock accumulation.
Therefore, first, one examines how each variable behaves under the time-series. Consequently, the unit root test the annual FDI, total factors of production, total capital accumulation over the period, and the growth rates of output. In this test, one utilizes the ADF and augmented Dickey- Fuller procedures to find the extent of integration between the units. A time-trend equation estimate for output growth rates, gt, and every other data in this case correspond to the series:

gt = c0 + c1t + ut, where ut is basically what the profession terms “a white noise”.

The results computed in Panel “A” column of Table 3 establish all the series to be (1) process, and consequently, follow a time trend. That is to say, that through the study period, output growth rates in the US showed movements that are in conformity to the linearity hypothesis. In other word, total capital stock and FDI contributes to linear endogenous growth.
In the further investigation of the long-term link that exists on the relationship between all the other variables and the FDI inflows, after one confirms the linearity of these variables, one then test the co-integration gt through the application of the Johansen likelihood ratio test (Tong). The estimate value is obtainable through the regression equation below:
gt =  + 1gt-1 + • • • + k-1 gt - (k-1) + gt - k + ut (2).
In this case, k represents the number of lags assumed for the VAR in levels,  is a vector of constant terms, t and  represent the (n x n) matrices of OLS coefficients, and ut denotes the (n x 1) vector of OLS residuals. The computed results of the test appear in Panel B of Table 3 below. It confirms that the FDI and output growth rates in the United States are in a co-integration.
Table 3: Time-SeriesAnalysis

PANEL A: UNIT ROOT TESTS (LEVELS) AND TRENDREGRESSIONS
Series ADF Statistics TrendResults
Output Growth -2.90 0.0012***(3.76)
FDI -2.98 0.0081***(4.35)
Capital Investment -2.41 0.0041***(6.61)Total Factorof Productivity(TFP) -3.34 0.0022***(4.75)

PANEL B: JOHANSEN’S COINTEGRATION TESTS - PAIRED SERIES
FDI
Output Growth 26.26**
Capital Investment 17.40**
TFP 25.12**

PANEL C: OLS REGRESSION TESTS
Variable TestResults
GDP Growth 0.1074***(4.20)
Capital Investment 0.3906***(10.69)
TFP 0.2231***(7.89)

The last time-series test in the estimation of OLS regressions for the available data in relationship to the FDI uses the independent variable:

gt = c0 +c1 FDIt + ut(3)
Conclusion
The findings of this research appear in Panel C of Table 3. The analysis shows that FDI contributes significantly to a positive to total factors of productivity, gross capital investments, and the output growth rates. These results show a complementary role of FDI to domestic capital accumulation during the 1980 to 2015 period of the study. In economic terms, FDI inflows contribute positively to the growth of the economy of United States. This research underscores the findings that even a debtor economy like the United States must work tirelessly to attract foreign direct investments, particularly long-term FDI investments to spur its economic growth, and thereby expand its GDP.
This study and its findings are of great significance to the American policy makers and the world’s scholars as a point of reference. It is prudent that one considers that in recent pasts, most governments of this world now embrace the higher education economic advancements whole-heartedly. Consequently, most nations’ spiralling international debt levels, coupled with a sharp deep in bank lending from the institutions such as the IMF and World Bank now forces most countries of the world to open up their countries’ economies to inflows of foreign direct investments. This is through privatization of State enterprises, and further attracts foreign inflows for long- term capital and economic growth. The prevailing trends in the world demand that every country must remain business friendly to attract foreign direct investments for economic growth, the United States included. However, USA continues to lead the pack through its attractive investment environment under democratic ideals. However, challenges still exist from the up-coming economies of the world that include China, Russia, India, Africa, and Brazil. The Chinese economic reforms that started in the late 1970s now make it the world’s factory. In this regard, coupled with large and empowered citizens, it has great potential of being the world’s largest consumer nation in the world. Consequently, the United States must now work even harder if it hopes to retain its number economic spot in the world. The reality is that while USA is the world’s leading FDI recipient, its MNCs are roaming all over the world in search of cheap labour in foreign markets, particularly for its manufacturing and services sectors.
GDP Analysis
The GDP of United States rose gradually year after year from almost 12.6 trillion in the 1980 to 44.3 trillion in 2005. This is a rise by slightly more than 350 percent in two and a half decades. Inflation over this period dropped drastically from 13.5 in 1980 to around just 3 percent in the early section of the new millennium. The lowest inflation rate during this period was in 1998 at less than 1.6 percent. This is an indication of the strength of the economy of the United States, making it the largest economy in the world presently. In this regard, the economy also boasts of the lowest unemployment rates in the world today. Consequently, the unemployment over the period dropped from the highest rate of 9.7 percent in 1982 to around 5 percent today. This is despite the inflation that gripped the United States and the world following the two Gulf wars in Kuwait and Iraq. However, the negative aspect of the economy of the United States is the balance of payment toward the United States. Throughout the two-and-a-half decades, the figures continue to rise in the negative direction. Consequently, the trade imbalance toward stood at 19.4 billion in 1980 to the current imbalance of 714.25 billion in 2005. This is a colossal rise. It is an indication that the consumers in the United States have a great appetite for imported goods, and this desires continues to rise by the day.









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