Macroeconomic regimes

A New-Keynesian macro-model is estimated accommodating regime-switching behavior in monetary policy and macro-shocks. A key to our estimation strategy is the use of survey-based expectations for inflation and output. Output and inflation shocks shift to the low volatility regime around 1985 and 1990, respectively. Monetary policy experiences multiple shifts with an important role in shaping macro-volatility. New estimates of the onset and demise of the Great Moderation are provided and the relative role played by macro-shocks and monetary policy is quantified. The estimated rational expectations model exhibits indeterminacy in the mean-square stability sense, mainly due to passive monetary policy. •A Markov-switching New-Keynesian macro-model is estimated with survey expectations.•Macro-shocks and systematic monetary policy all exhibit potential regime changes.•We provide new estimates of the onset and end of the Great Moderation.•Monetary policy is stabilizing after 1980, but with some accommodating spells.•The estimated model implies indeterminacy mainly due to passive monetary policy spells.