Lubik and Schorfheide (2002) examine the issue of indeterminacy in a New Keynesian monetary DSGE model, focusing on U.S. monetary policy. They show how likelihood-based estimation can be extended to account for indeterminacy and sunspot fluctuations. They construct posterior weights for the determinacy and indeterminacy regions of the parameter space and estimate the propagation of fundamental and sunspot shocks. According to their estimated New Keynesian model, monetary policy post-1982 is consistent with determinacy, whereas pre-Volcker policy is not. They find that before 1979, indeterminacy significantly altered the propagation of monetary policy, demand, and supply shocks. The paper discusses the implications of indeterminacy in dynamic systems and the importance of multivariate analysis in understanding macroeconomic instability. They argue that indeterminacy is a property of dynamic systems and should be studied through multivariate analysis. They also highlight the advantages of their econometric tools over univariate approaches, allowing for the estimation of additional parameters that characterize the model solution under indeterminacy and the importance of sunspots and the propagation of structural shocks. The authors apply their econometric tools to a New Keynesian business cycle model, revisiting the question of whether U.S. monetary policy was stabilizing pre- and post-Volcker. Their estimates confirm the findings of CGG that U.S. monetary policy before 1979 contributed to aggregate instability, and that policy became markedly more stabilizing during the Volcker-Greenspan period. The paper also discusses the limitations of their approach, including potential sensitivity to model misspecification. They compare the pre-Volcker fit of a simple New Keynesian model to a richer model specification with habit formation and backward-looking price setters, restricted to the determinacy region. They find that the data favor the indeterminacy interpretation provided by the simple model. The authors also note that the association of passive monetary policy with indeterminacy is very model-specific. They conclude that their empirical finding that prior to 1979 aggregate fluctuations are best described by indeterminacy is conditional on the model choice. However, since the New Keynesian monetary model considered in this paper has become a standard benchmark in the literature, they regard it as a good starting point for the application of their techniques.Lubik and Schorfheide (2002) examine the issue of indeterminacy in a New Keynesian monetary DSGE model, focusing on U.S. monetary policy. They show how likelihood-based estimation can be extended to account for indeterminacy and sunspot fluctuations. They construct posterior weights for the determinacy and indeterminacy regions of the parameter space and estimate the propagation of fundamental and sunspot shocks. According to their estimated New Keynesian model, monetary policy post-1982 is consistent with determinacy, whereas pre-Volcker policy is not. They find that before 1979, indeterminacy significantly altered the propagation of monetary policy, demand, and supply shocks. The paper discusses the implications of indeterminacy in dynamic systems and the importance of multivariate analysis in understanding macroeconomic instability. They argue that indeterminacy is a property of dynamic systems and should be studied through multivariate analysis. They also highlight the advantages of their econometric tools over univariate approaches, allowing for the estimation of additional parameters that characterize the model solution under indeterminacy and the importance of sunspots and the propagation of structural shocks. The authors apply their econometric tools to a New Keynesian business cycle model, revisiting the question of whether U.S. monetary policy was stabilizing pre- and post-Volcker. Their estimates confirm the findings of CGG that U.S. monetary policy before 1979 contributed to aggregate instability, and that policy became markedly more stabilizing during the Volcker-Greenspan period. The paper also discusses the limitations of their approach, including potential sensitivity to model misspecification. They compare the pre-Volcker fit of a simple New Keynesian model to a richer model specification with habit formation and backward-looking price setters, restricted to the determinacy region. They find that the data favor the indeterminacy interpretation provided by the simple model. The authors also note that the association of passive monetary policy with indeterminacy is very model-specific. They conclude that their empirical finding that prior to 1979 aggregate fluctuations are best described by indeterminacy is conditional on the model choice. However, since the New Keynesian monetary model considered in this paper has become a standard benchmark in the literature, they regard it as a good starting point for the application of their techniques.