The new keynesian approach to dynamic general equilibrium modeling: models, methods, and macroeconomic policy evaluation

This chapter aims to provide a hands-on approach to New Keynesian models and their uses for macroeconomic policy analysis. It starts by reviewing the origins of the New Keynesian approach, the key model ingredients and representative models. Building blocks of current-generation dynamic stochastic general equilibrium (DSGE) models are discussed in detail. These models address the famous Lucas critique by deriving behavioral equations systematically from the optimizing and forward-looking decision-making of households and firms subject to well-defined constraints. State-of-the-art methods for solving and estimating such models are reviewed and presented in examples. The chapter goes beyond the mere presentation of the most popular benchmark model by providing a framework for model comparison along with a database that includes a wide variety of macroeconomic models. Thus, it offers a convenient approach for comparing new models to available benchmarks and for investigating whether particular policy recommendations are robust to model uncertainty. Such robustness analysis is illustrated by evaluating the performance of simple monetary policy rules across a range of recently-estimated models including some with financial market imperfections and by reviewing recent comparative findings regarding the magnitude of government spending multipliers. The chapter concludes with a discussion of important objectives for on-going and future research using the New Keynesian framework

Quasi-periodic spatiotemporal models of brain activation in single-trial MEG experiments

Magneto-encephalography (MEG) is an imaging technique which measures neuronal activity in the brain. Even when a subject is in a resting state, MEG data show characteristic spatial and temporal patterns, resulting from electrical current at specific locations in the brain. The key pattern of interest is a ‘dipole’, consisting of two adjacent regions of high and low activation which oscillate over time in an out-of-phase manner. Standard approaches are based on averages over large numbers of trials in order to reduce noise. In contrast, this article addresses the issue of dipole modelling for single trial data, as this is of interest in application areas. There is also clear evidence that the frequency of this oscillation in single trials generally changes over time and so exhibits quasi-periodic rather than periodic behaviour. A framework for the modelling of dipoles is proposed through estimation of a spatiotemporal smooth function constructed as a parametric function of space and a smooth function of time. Quasi-periodic behaviour is expressed in phase functions which are allowed to evolve smoothly over time. The model is fitted in two stages. First, the spatial location of the dipole is identified and the smooth signals characterizing the amplitude functions for each separate pole are estimated. Second, the phase and frequency of the amplitude signals are estimated as smooth functions. The model is applied to data from a real MEG experiment focusing on motor and visual brain processes. In contrast to existing standard approaches, the model allows the variability across trials and subjects to be identified. The nature of this variability is informative about the resting state of the brain

Information transmission in oscillatory neural activity

Periodic neural activity not locked to the stimulus or to motor responses is usually ignored. Here, we present new tools for modeling and quantifying the information transmission based on periodic neural activity that occurs with quasi-random phase relative to the stimulus. We propose a model to reproduce characteristic features of oscillatory spike trains, such as histograms of inter-spike intervals and phase locking of spikes to an oscillatory influence. The proposed model is based on an inhomogeneous Gamma process governed by a density function that is a product of the usual stimulus-dependent rate and a quasi-periodic function. Further, we present an analysis method generalizing the direct method (Rieke et al, 1999; Brenner et al, 2000) to assess the information content in such data. We demonstrate these tools on recordings from relay cells in the lateral geniculate nucleus of the cat.Comment: 18 pages, 8 figures, to appear in Biological Cybernetic

The equivalence of information-theoretic and likelihood-based methods for neural dimensionality reduction

Stimulus dimensionality-reduction methods in neuroscience seek to identify a low-dimensional space of stimulus features that affect a neuron's probability of spiking. One popular method, known as maximally informative dimensions (MID), uses an information-theoretic quantity known as "single-spike information" to identify this space. Here we examine MID from a model-based perspective. We show that MID is a maximum-likelihood estimator for the parameters of a linear-nonlinear-Poisson (LNP) model, and that the empirical single-spike information corresponds to the normalized log-likelihood under a Poisson model. This equivalence implies that MID does not necessarily find maximally informative stimulus dimensions when spiking is not well described as Poisson. We provide several examples to illustrate this shortcoming, and derive a lower bound on the information lost when spiking is Bernoulli in discrete time bins. To overcome this limitation, we introduce model-based dimensionality reduction methods for neurons with non-Poisson firing statistics, and show that they can be framed equivalently in likelihood-based or information-theoretic terms. Finally, we show how to overcome practical limitations on the number of stimulus dimensions that MID can estimate by constraining the form of the non-parametric nonlinearity in an LNP model. We illustrate these methods with simulations and data from primate visual cortex

Regularized brain reading with shrinkage and smoothing

Functional neuroimaging measures how the brain responds to complex stimuli. However, sample sizes are modest, noise is substantial, and stimuli are high dimensional. Hence, direct estimates are inherently imprecise and call for regularization. We compare a suite of approaches which regularize via shrinkage: ridge regression, the elastic net (a generalization of ridge regression and the lasso), and a hierarchical Bayesian model based on small area estimation (SAE). We contrast regularization with spatial smoothing and combinations of smoothing and shrinkage. All methods are tested on functional magnetic resonance imaging (fMRI) data from multiple subjects participating in two different experiments related to reading, for both predicting neural response to stimuli and decoding stimuli from responses. Interestingly, when the regularization parameters are chosen by cross-validation independently for every voxel, low/high regularization is chosen in voxels where the classification accuracy is high/low, indicating that the regularization intensity is a good tool for identification of relevant voxels for the cognitive task. Surprisingly, all the regularization methods work about equally well, suggesting that beating basic smoothing and shrinkage will take not only clever methods, but also careful modeling.Comment: Published at http://dx.doi.org/10.1214/15-AOAS837 in the Annals of Applied Statistics (http://www.imstat.org/aoas/) by the Institute of Mathematical Statistics (http://www.imstat.org

Retinal oscillations carry visual information to cortex

Thalamic relay cells fire action potentials that transmit information from retina to cortex. The amount of information that spike trains encode is usually estimated from the precision of spike timing with respect to the stimulus. Sensory input, however, is only one factor that influences neural activity. For example, intrinsic dynamics, such as oscillations of networks of neurons, also modulate firing pattern. Here, we asked if retinal oscillations might help to convey information to neurons downstream. Specifically, we made whole-cell recordings from relay cells to reveal retinal inputs (EPSPs) and thalamic outputs (spikes) and analyzed these events with information theory. Our results show that thalamic spike trains operate as two multiplexed channels. One channel, which occupies a low frequency band (<30 Hz), is encoded by average firing rate with respect to the stimulus and carries information about local changes in the image over time. The other operates in the gamma frequency band (40-80 Hz) and is encoded by spike time relative to the retinal oscillations. Because these oscillations involve extensive areas of the retina, it is likely that the second channel transmits information about global features of the visual scene. At times, the second channel conveyed even more information than the first.Comment: 21 pages, 10 figures, submitted to Frontiers in Systems Neuroscienc