We estimate a New-Keynesian macro model accommodating regime-switching behavior in
monetary policy and in macro shocks. 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. However, we also identify multiple shifts between accommodating
and active monetary policy regimes, which play an as important role as shock volatility in
driving the volatility of the macro variables. We provide new estimates of the onset and demise
of the Great Moderation and quantify the relative role played by macro-shocks and monetary policy.
The estimated rational expectations model exhibits indeterminacy in the mean square stability
sense, mainly because monetary policy is excessively passive
