Understanding the new-keynesian model when monetary policy switches regimes
By: Roger E.A. Farmer, Daniel F. Waggoner, Tao Zha.
Contributors: Farmer, Roger E.A.; Waggoner, Daniel F.; Tao, Zha.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 12965; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 12965.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "This paper studies a New-Keynesian model in which monetary policy may switch between regimes.  We derive sufficient conditions for indeterminacy that are easy to implement and we show that the necessary and sufficient condition for determinacy, provided by Davig and Leeper, is necessary but not sufficient.  More importantly, we use a two-regime model to show that indeterminacy in a passive regime may spill over to an active regime, no matter how active the latter regime is.  As a result, a passive monetary policy is more damaging than has been previously thought.  Our results imply that the propagation of shocks in an active regime, such as that of the Federal Reserve in the post-1982 period, may be substantially affected by the possibility of a return to a passive regime of the kind that was followed in the 1960s and 1970s"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 5/18/2007.

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