The appreciation of the dollar, of course, implies a depreciation in other countries’ exchange rates; the depreciation will stimulate foreign aggregate demand by raising net exports. Offsetting this will be the effect of the decline in U.S. income on the demand for foreign countries’ exports. The net effect, for countries with floating exchange rates, is likely to be small.
That is, floating exchange rates tend to insulate a country from monetary shocks abroad. Other effects of globalization on the U.S. economy The increased openness of the U.S. economy has also focused attention on the possible effects of globalization on the macroeconomic performance of the U.S. economy, beyond the effects on the transmission of monetary policy that I have already addressed.