And, reflecting the greater integration of global financial markets, the correlation of U.S. and foreign equity and bond markets has trended broadly upward for several decades.3  Channels of Transmission of Global Shocks to the U.S. Economy This increased integration I have described has heightened the exposure of the U.S. economy to external shocks.
But what are the channels of transmission of these shocks to the United States? For concreteness, let us consider the case of a negative demand shock originating abroad, such as a foreign recession. First, this shock affects the United States through direct trade links, lowering demand for U.S. exports and, thus, lowering U.S. GDP.