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

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.Industrial capacity ; Imports ; Inflation (Finance) ; Prices