8 See “Monetary policy after the energy shock”, Fabio Panetta, Member of the Executive Board of the ECB, 16 February 2023, and Bloomberg Interview with Isabel Schnabel, Member of the Executive Board of the ECB, 15 February 2023. 9 Recent experience of large positive employment gaps (negative unemployment gaps) raising inflation significantly provides strong evidence for a non-linear Phillips curve.
Central banks should therefore consider incorporating downward wage and price rigidity and non-linear Phillips curves into their macroeconomic models. See “25 Years of Excess Unemployment in Advanced Economies: Lessons for Monetary Policy”, Joseph E. Gagnon and Madi Sarsenbayev, Peterson Institute for International Economics, Working Paper 22-17, October 2022 10 See Schnabel, 2023 (op. cit.)