For example, if competition between domestic goods and imported goods from emerging economies intensifies, upward pressure on prices may be contained even when the domestic output gap turns positive. Likewise, if intensifying global competition is pushing firms to raise corporate value, upward pressure on prices may be contained as firms try to increase wage restraint despite tight labor market conditions and to raise productivity.
The sensitivity of prices to changes in the output gap, however, may be subject to substantial variation as it differs depending on how it is influenced by deregulation, advances in information and communication technology, and economic globalization. If sensitivity to the output gap is not as weak as assumed, prices may rise more than expected.