Do we really know that US monetary policy was destabilizing in the 1970s?

The paper re-examines whether the Federal Reserve’s monetary policy was a source of
instability during the Great Inflation by estimating a sticky-price model with positive trend
inflation, commodity price shocks and sluggish real wages. Our estimation provides
empirical evidence for substantial wage-rigidity and finds that the Federal Reserve
responded aggressively to inflation but negligibly to the output gap. In the presence of
non-trivial real imperfections and well-identified commodity price-shocks, U.S. data
prefers a determinate version of the New Keynesian model: monetary policy-induced
indeterminacy and sunspots were not causes of macroeconomic instability during the
pre-Volcker era.