2007), “Understanding the new-Keynesian model when monetary policy switches regimes,” National Bureau of Economic Research Working Paper 12965, National Bureau of Economic Research

Abstract. This paper studies a New-Keynesian model in which monetary policy may switch between regimes. The study is of substantive importance because the extent to which there is indeterminacy or determinacy in this kind of model is largely unknown. We derive a set of sufficient conditions that enable one to construct a wide range of indeterminate solutions. We show that the necessary and sufficient condition for determinacy, provided by Davig and Leeper (2007), is necessary, but not sufficient. A number of numerical examples are used to illustrate our general point that indeterminacy is much more prevalent than previously thought not only in theory but in practice. I