Equilibrium determinacy with behavioral expectations

Behavioral expectations affect determinacy in macroeconomic models. Relaxing rational expectations can make models more or less well behaved, depending on the behavioral assumptions. In some cases, multiplicity is created; in other cases, multiplicity is eliminated. Is it possible to tell exactly when there are multiple solutions? Yes: I derive a Behavioral Blanchard-Kahn sufficient condition that ensures a unique equilibrium exists. An equilibrium must be unique if the BBK condition holds, or if a Sunspot Admissibility (SSA) condition fails. When SSA holds and the BBK condition fails, multiplicity occurs. These conditions depend on the spectrum of the behavioral expectation operator. I describe how to check these conditions for an arbitrary behavioral expectation, and illustrate with a large variety of popular types of expectations, heuristics, and information frictions. As an example, I demonstrate that a large class of behavioral expectations imply a unique solution to the New Keynesian model with an interest rate peg, including all strictly backwards-looking heuristics. Another class of expectations imply that asset prices exhibit non-fundamental volatility in a standard model.