In relation to amplification, a boost to the domestic business environment can trigger a larger output response than would be possible in a closed economy, since the prospect of higher investment returns and higher wages draws in capital and labour from overseas. In reverse, a negative shock may be amplified by capital outflows and net emigration.
In our case, this could be explained by a lack of demand pressures, represented by a negative output gap, which is forecast at –1.8 per cent of GDP for 2015. 14 However, it is unclear as to whether this trend will continue, or if the full impact of the pass-through is merely delayed, and policy makers must thus remain vigilant.