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Has excess capacity abroad reduced U.S. inflationary pressures?

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  • James A. Orr

Abstract

This article examines whether the sizable amount of excess capacity abroad in recent years has eased U.S. inflationary pressures by keeping import prices from rising as fast as the prices of U.S.-produced goods. The analysis finds that overall import price growth has roughly kept pace with U.S. inflation because the effects of lower inflation abroad have been offset by exchange rate changes. In the case of Japan, dollar depreciation has rendered excess capacity basically ineffective against U.S. inflationary pressures.

Suggested Citation

  • James A. Orr, 1994. "Has excess capacity abroad reduced U.S. inflationary pressures?," Quarterly Review, Federal Reserve Bank of New York, vol. 19(Sum), pages 101-106.
    • Handle: RePEc:fip:fednqr:y:1994:i:sum:p:101-106:n:v.19no.2
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    Citations

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    Cited by:

    1. Edward N. Gamber & Juann Hung, 1999. "The Impact of Globalization on the U.S. Business Cycle: Technical Paper 1999-6," Working Papers 13342, Congressional Budget Office.
    2. Alessandro Calza, 2009. "Globalization, Domestic Inflation and Global Output Gaps: Evidence from the Euro Area," International Finance, Wiley Blackwell, vol. 12(3), pages 301-320, December.
    3. Enrique Martinez-Garcia & Mark A Wynne, 2013. "Global slack as a determinant of US inflation," BIS Papers chapters, in: Bank for International Settlements (ed.), Globalisation and inflation dynamics in Asia and the Pacific, volume 70, pages 93-98, Bank for International Settlements.
    4. Carol Corrado & Joe Mattey, 1997. "Capacity Utilization," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 151-167, Winter.
    5. Enrique Martínez García & Mark A. Wynne, 2010. "The global slack hypothesis," Staff Papers, Federal Reserve Bank of Dallas, issue Sep.
    6. Mark A. Wynne, 2008. "First steps: developing a research agenda on globalization and monetary policy," Annual Report, Globalization and Monetary Policy Institute, Federal Reserve Bank of Dallas, pages 4-13.
    7. Calza, Alessandro, 2008. "Globalisation, domestic inflation and global output gaps: Evidence from the euro area," Working Paper Series 890, European Central Bank.
    8. Alessandro Calza, 2008. "Globalisation, domestic inflation and the global output gaps: evidence from the Euro era," Globalization Institute Working Papers 13, Federal Reserve Bank of Dallas.

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