[15] The Irish economy was not always as open and globally interdependent as it is today. For the first part of its modern history, Ireland had a highly protectionist economy, with high tariffs, quotas, and other trade barriers designed to shelter domestic industries from foreign competition.
27 Thus, for a given level of aggregate demand, the fall in potential output will tend to be such that actual output exceeds potential, leading to a positive output gap and upward pressure on inflation. There is a widespread perception that commodity prices affect inflation also through demand effects.