Not so long ago, the western world's greatest worry was that emerging markets, like a set of dominoes, would fall to communism. But these days, when western leaders talk about "the domino effect", it's devaluation they are discussing.

As Latin America follows Russia and Asia into troubled economic waters, the question exercising the minds of most economists is whether the US and Europe can remain "an oasis of prosperity" in an increasingly arid world economy.

Views among the leaders of the West's economies are mixed with US Federal Reserve chairman, Mr Alan Greenspan deeming it "not credible". But EU leaders are far more sanguine and seem to think that Europe at least can ride out the storm.

As for Ireland, much will depend on the fate of the US and continental European economies, with whom most of our trade is done. To date, however, the crisis in the global economy has had little effect.

Trade with countries outside the European Union rose by a steep 37 per cent in the first seven months of the year, with exports valued at £8.2 billion compared with £6 billion a year earlier.

However, a closer look at the figures released by the Central Statistics Office (CSO) shows that exports to the US performed very strongly in this category, rising by 66 per cent and accounting for more than 43 per cent of the total. By contrast, exports to Japan, our second-largest trading partner outside the EU, rose by a more modest 9 per cent compared with 15 to 20 per cent growth in recent years, suggesting the impact on the more stricken areas of the world economy may be starting to feed through.

Meanwhile, the collapse of the Russian rouble came too late to show up in the last set of figures but will certainly affect food exports, particularly beef. Ireland exported 70,000 tonnes of beef to Russia last year and 39,000 tonnes in the first six months of 1998. Food exporters in particular are bracing themselves for tough times ahead as they face increased competition from countries like Australia and New Zealand, pushed out of their traditional markets.

Another area of the economy that could well feel the chill winds from abroad in the weeks and months ahead is the multinational sector.

"Ireland is very dependent on three specific industries which account for a huge proportion of exports - chemicals, pharmaceuticals and computers. We are very vulnerable if any of those industries suffers a setback," says Dr McLaughlin, chief economist at ABN-Amro.

Meantime, the Irish stock market has already taken a battering as a result of the crisis although the majority of Irish companies, including the banks, have little or no heavy exposure to the current trouble spots.

The crisis is not without some positive side effects. Falling commodity prices, including oil, are good news for an economy grappling with rising inflation and many analysts believe the full effects of the fall have yet to feed through to retail prices for petrol and food.

The downward pressure on prices worldwide also suggests we should find ourselves in a low interest rate environment for some time to come which should continue to support consumer demand, one of the key drivers of economic growth in recent years.

Some believe that the slowdown may even have come at a good time for the Irish economy - providing it with a "soft landing" rather than bringing it down to earth with a bump.

"As a classic textbook example of a small open economy, Ireland has be be affected by a slowdown in global economic activity and indeed this may be good news for an economy which has been showing distinct signs of overheating over the past year," says Mr Jim Power, economist at Bank of Ireland Group Treasury.

Mr Power expects the economy to grow at a rate of around 8 per cent this year but has pared back his forecasts for next year, mainly on the assumption of slower export growth. He has cut his 1999 estimate from 7.5 per cent to 6.5 per cent - a growth rate that would still be the envy of many other countries in the OECD, not to mind the rest of the world.

Tomorrow: The case for reform of the International Monetary Fund and the World Bank