mutual fund misclassification evidence based on style analysis an iterative application of william sharpe s method of style analysis is applied to the classification of equity mutual funds a new methodology for creating purified mutual fund style indexes is used to verify existing classifications results suggest that 9 percent of all equity funds are seriously misclassified and another 31 percent are somewhat misclassified two factors emerge as the most likely reasons for misclassification 1 the ambiguity of the current classification system and 2 competitive pressures in the mutual fund industry and compensation structures that reward relative performance monte carlo simulations on out of sample data show that this misclassification has a significant effect on investors ability to build diversified portfolios of mutual funds

co2 emissions from china s power sector at the provincial level consumption versus production perspectives abstract the chinese electricity sector plays an important role in domestic co2 mitigation efforts due to its large contribution to overall emissions however primary energy resources used for electricity generation are not evenly distributed across the country such a supply and demand mismatch in reality results in large parts of electricity to be transferred from economically less developed provinces in the west to economic growth centres in the east a literature review shows that the emissions embodied in electricity transfer within china have not been explicitly studied although in fact they cause a shift of environmental pollution away from economically well off provinces to resource rich and less developed provinces therefore it is critical for policy makers to address this issue under such a circumstance a bottom up model is developed to calculate direct co2 emissions embodied in electricity export and import between chinese provinces it helps quantifying emissions from the power sector associated with both production and consumption perspectives and sheds lights on the environmental impact of regional supply and demand mismatch in china results show that the difference between consumption and production based co2 emissions from electricity sector in some provinces were higher than the total co2 emissions from electricity sector in netherlands in the case of beijing or as high as the total co2 emission from france s electricity sector in the case of guangdong based upon chinese realities policy implications and suggestions are made such as how to set up appropriate emission reduction targets for electricity sector at provincial level and the inclusion of consumption emissions in designing china s cap and trade mechanism the methodology and findings may be useful for investigation of embodied emissions throughout various regions of the world

life cycle carbon emission flow analysis for electricity supply system a case study of china abstract the carbon emission embodied in trade is fundamental for allocation of responsibility between producers and consumers this paper quantitatively analyzes embodied carbon emissions along the life cycle of electricity supply based on network theory a modified carbon emission flow model is established based on life cycle assessment considering power losses there is also a case study of china s interregional electricity supply system in 2010 focusing on two carbon emission carriers electricity coal transportation and electricity transmission results show that the total carbon emission flow reached 169 355 mtco 2 eq i e 4 67 of the life cycle carbon emission of this 61 1 was carried by electricity coal transportation before power generation and transmission owing to an uneven distribution of coal resources the eastern and southern regions are the major net sinks of carbon emission flows representing 52 9 and 27 8 of the total respectively because of their enormous energy imports in contrast the sanxi region and central china are major net sources of carbon emission flow the proposed model may help allocate environmental responsibility among different regions to guarantee balanced trans regional development

marginal abatement costs of co2 emissions in the thermal power sector a regional empirical analysis from china abstract quantifying marginal abatement costs of co2 emissions are beneficial to estimate mitigation potentials and costs of china s regional thermal power sector based on the panel data of 30 provinces from 2004 to 2013 this study estimates the technical efficiency reduction potential and marginal abatement costs of co2 emissions from the thermal power sector in china using a parametric quadratic directional output distance function a regression analysis is undertaken to identify the factors that drive marginal abatement costs the main results are 1 the mean value of directional output distance function in china s thermal power sector is 0 0449 indicating that inefficient production of chinese thermal power sector accounts for 4 49 co2 emissions could be mitigated by accumulated 1 22 billion ton in the past ten year which is approximate 4 49 of total co2 emissions 2 the national weighted average marginal abatement costs of co2 emissions are 316 51 yuan ton which is far higher than carbon price in the current ets emission trading system pilots in china implying that carbon price does not inflect supply and demand of carbon allowance 3 the regression results show that the marginal abatement costs positively connect with regional power scale namely a 1 increase in power scale will result in a 13 8 increase technology level coal supply and power structure are negatively correlated with marginal abatement costs namely a 1 increase in technology level coal supply and power structure will result respectively in a 30 41 4 38 and 77 7 decrease

global trading versus linking architectures for international emissions trading abstract international emissions trading is widely seen as an indispensable policy pillar of climate change mitigation stern n 2007 the economics of climate change the stern review cambridge university press new york this article analyzes five different types of trading architectures classified into two top down unfccc driven and three bottom up driven by individual countries or regions approaches the two types of approaches are characterized by a trade off between environmental effectiveness and political feasibility respectively whereas their relative cost effectiveness depends on implementation details bottom up architectures constitute imperfect substitutes for top down architectures in terms of environmental effectiveness and thus remain mere fallback options however especially the formal linking architecture can act as complement in terms of cost effectiveness

the impact of domestic trade on china s regional energy uses a multi regional input output modeling to systematically reveal how domestic trade impacts on china s regional energy uses an interprovincial input output modeling is carried out to address demand derived energy requirements for the regional economies in 2007 based on the recently available data both the energy uses embodied in final demand and interregional trade are investigated from the regional and sectoral insights significant net transfers of embodied energy flows are identified from the central and western areas to the eastern area via interregional trade shanxi is the largest energy producer and interregional embodied energy deficit receiver in contrast to guangdong as the largest energy user and surplus receiver by considering the impacts of interregional trade the energy uses of most eastern regions increase remarkably for instance shanghai hainan zhejiang beijing jiangsu and guangdong have their embodied energy requirements 87 49 19 97 13 64 12 60 6 46 and 6 38 times of their direct energy inputs respectively in contrast the embodied energy uses of some central and western regions such as inner mongolia shanxi xinjiang shaanxi and guizhou decrease largely the results help understand the hidden network linkages of interregional embodied energy flows and provide critical insight to amend china s current end reduction oriented energy policies by addressing the problem of regional responsibility transfer

making weak instrument sets stronger factor based estimation of inflation dynamics and a monetary policy rule the problem of weak identification has recently attracted attention in the analysis of structural macroeconomic models using robust methods can result in large confidence sets making precise inference difficult we overcome this problem in the analysis of the hybrid new keynesian phillips curve and a forward looking taylor rule by employing stronger instruments we suggest exploiting information from a large macroeconomic data set by generating factors and using them as additional instruments this approach results in stronger instrument sets and hence smaller weak identification robust confidence sets it allows us to conclude that there has been a shift toward more active monetary policy from the pre volcker regime to the volcker greenspan tenure

emissions embodied in chinese exports taking into account the special export structure of china abstract quantification of co 2 emissions embodied in china s trade is important for an informed debate on whom to blame for the recent rise in chinese emissions or the calculation of border carbon adjustments applying input output io techniques we calculate these emissions in 1 a standard model 2 a regionally disaggregated model taking into account that export production is concentrated in more advanced and more emission efficient provinces and 3 in a model with export processing taking into account that almost half of the chinese exports rely on a large share of imported intermediates and little domestic value and emissions added we compare year 2007 emissions embodied in chinese exports in a unified framework we also report emissions embodied in chinese imports used for intermediate production of exports by combining calculations for china with data from global io models we find that both a model with 30 provinces 1730 mt co 2 and a model accounting for export processing 1630 mt yield lower chinese emissions embodied in exports compared to the standard model 1782 mt in the regional model emissions are even lower 1522 mt if interprovincial trade is not taken into account

gmm estimation of the new phillips curve abstract this paper applies test statistics developed by stock and wright econometrica 68 2000 1055 to examine the two specifications of the new keynesian phillips curve in gali and gertler journal of monetary economics 44 1999 195 the new test statistics demonstrate the inadequacy of conventional gmm methodology by indicating two features that are neglected by gali and gertler observational equivalence in the baseline model and weak identification in the hybrid model

fund management changes and equity style shifts we examined changes in performance risk and investment style for mutual funds that changed managers during the 1983 91 period results show that funds experiencing a managerial change performed poorly before the change primarily as a result of inferior security selection risk adjusted performance on average improved 200 basis points annually and systematic risk increased significantly after the management change we also classified funds according to their equity effective mix of company sizes and value versus growth more than 65 percent of the funds experienced a shift in investment style after the management change

analysis of the market penetration of clean coal technologies and its impacts in china s electricity sector abstract this paper discusses policy instruments for promoting the market penetration of clean coal technologies ccts into china s electricity sector and the evaluation of corresponding effects based on the reality that coal will remain the predominant fuel to generate electricity and conventional pulverized coal boiler power plants have serious impacts on environment degradation development of clean coal technologies could be one alternative to meet china s fast growing demand of electricity as well as protect the already fragile environment a multi period market equilibrium model is applied and an electricity model of china is established to forecast changes in the electricity system up to 2030s three policy instruments so 2 emission charge co 2 emission charge and implementing subsidies are considered in this research the results show that all instruments cause a significant shift in china s electricity structure promote ccts competitiveness and lead china to gain great benefit in both resource saving and environment improvement since resource security and environment degradation are becoming primary concerns in china policies that could help to gain generations market share of advanced coal based technologies such as ccts is suitable for the current situation of china s electricity sector

china s provincial co2 emissions embodied in international and interprovincial trade trades create a mechanism of embodied co2 emissions transfer among regions causing distortion on the total emissions as the world s second largest economy china has a large scale of trade which results in the serious problem of embodied co2 emissions transfer this paper analyzes the characteristics of china s co2 emissions embodied in international and interprovincial trade from the provincial perspective the multi regional input output model is used to clarify provincial co2 emissions from geographical and sectoral dimensions including 30 provinces and 28 sectors two calculating principles production accounting principle and consumption accounting principle munksgaard and pedersen 2001 are applied the results show that for international trade the eastern area accounts for a large proportion in china s embodied co2 emissions the sectors as net exporters and importers of embodied co2 emissions belong to labor intensive and energy intensive industries respectively for interprovincial trade the net transfer of embodied co2 emissions is from the eastern area to the central area and energy intensive industries are the main contributors with the largest amount of direct co2 emissions the eastern area plays an important role in co2 emissions reduction the central and western areas need supportive policies to avoid the transfer of industries with high emissions

the development of renewable energy in resource rich region a case in china abstract with the largest population living in rural areas the lack of clean energy supply is an important problem in china and the utilization of renewable energy not only meets the demand of energy but also provides a basis for environmental protection and sustainable development this paper reviews use of clean energy in a resource rich region including the basic principle of the development of recycling agriculture the potential the present status and the future of renewable energy in the region rural areas if the project will be finished there will be 300 000 families benefiting from it and it can bring at least 2 2 108 us dollars revenue increase directly the indirect revenue increase will be 0 15 billion us dollars the environment will be improved and the living standard in jincheng s rural areas is also be greatly improved because of developing biogas project based on the developing status and constraint conditions the solutions to further promote renewable energy projects in this region are also proposed

monetary policy rules and macroeconomic stability some new evidence in a seminal paper richard clarida jordi gall and mark gertler 2000 studied the implica tions of monetary policy for macroeconomic fluctuations using a prototypical forward looking sticky price model of the monetary transmission mechanism they proposed simple forward looking equations for the reaction function of monetary policy to deviations of inflation and output from their implicit targets they estimated these equations over sample periods before and after paul volcker became chairman of the fed they found that the policy rate did not react sufficiently strongly to expected deviations of inflation from target prior to volcker thus violat ing the taylor principle and opening up the possibility of sunspot fluctuations induced by self fulfilling expectations in contrast policy over the volcker greenspan era was found to satisfy the taylor principle and this was seen as an important factor contributing to the conquest of us inflation 1

the mechanism and policy on the electricity price of renewable energy in china abstract with the rapid development of the society energy demand is becoming more urgent so it is necessary to exploit the renewable energy because of the limited conventional energy this paper introduced the current development situation of the renewable energy analyzed the subsidy policy and discussed the problems of the electricity price mechanisms and policies in china finally we got the conclusion that government should formulate more policies to encourage private and foreign enterprises to invest renewable energy industries as well as to apply the cdm mechanism

of tournaments and temptations an analysis of managerial incentives in the mutual fund industry we test the hypothesis that when their compensation is linked to relative performance managers of investment portfolios likely to end up as losers will manipulate fund risk differently than those managing portfolios likely to be winners an empirical investigation of the performance of 334 growth oriented mutual funds during 1976 to 1991 demonstrates that mid year losers tend to increase fund volatility in the latter part of an annual assessment period to a greater extent than mid year winners furthermore we show that this effect became stronger as industry growth and investor awareness of fund performance increased over time

window dressing by pension fund managers this paper takes a first look at investment strategies of managers of 769 pension funds with total assets of 129 billion at the end of 1989 the data show that managers of these funds tend to oversell stocks that have performed poorly relative sales of losers accelerate in the fourth quarter when funds portfolios are closely examined by the sponsors this result supports the view that fund managers window dress their portfolios to impress sponsors and suggests that managers are evaluated on their individual stock selections and not just aggregate portfolio performance this abstract was borrowed from another version of this item

temporal and spatial variations in consumption based carbon dioxide emissions in china china s co2 emissions have sharply increased in recent years with soaring economic development and urbanization consumption based accounting of co2 emissions could provide new insights for allocating regional mitigation responsibility and curbing the emissions a multi regional input output model is used to study the trends and disparities of consumption based emissions from chinese provinces during the period 2002 2007 results show that china s consumption based co2 emissions grew from 3549 mt in 2002 to 5403 mt in 2007 with an annual average growth rate of 8 8 the annual growth rate in the richer eastern region was over 10 because of a rapid increase in capital investment and the growth of urban consumption consumption based co2 emissions embodied in interprovincial trades contributed only 10 351 mt to the national total of such emissions in 2002 but 16 864 mt in 2007 given low per capita emissions currently china s consumption based emissions have much room to grow because of further development of urbanization and stimulation of domestic demand the government should pay greater attention to controlling co2 emissions from a consumption based perspective 2014 elsevier ltd

electricity regulation and electricity market reforms in china the electricity industry of china has been in a process of reforms since the 1980s this paper gives a review on the three main stages of reforms in china so as to trace out key features of various reform measures including those for power investment financing the separation between government and power enterprises and the division between power generation firms and power grids the findings suggest that further regulatory change in china s electricity market reform is necessary when integration of the electricity markets and increased competition are paving the way ahead for a market oriented structure prospective electricity regulation in the form of a strong legal system and effective institutions that protect market competition and promote appropriate incentives for efficiency are suggested in the paper

how can china reach its co2 intensity reduction targets by 2020 a regional allocation based on equity and development in late 2009 the chinese government committed to cut its carbon dioxide emissions per unit of gross domestic product gdp by 40 to 45 of 2005 levels by 2020 this has raised the issue of how to allocate the co2 reduction target regionally to meet the national reduction target to meet this objective the following aspects may be taken into consideration equity principles common but differentiated responsibilities intensity reduction target fulfillment and economic difference and reduction potential among provinces this paper selects per capita gdp accumulated fossil fuel related co2 emissions and energy consumption per unit of industrial added value as indicators for emission reduction capacity responsibility and potential respectively based on these three indicators a comprehensive index is developed and an intensity allocation model constructed as decision makers may have different preferences when allocating the reduction burden we allocate different weights to the indicators analyzing the results using cluster analysis the following aspects may also be considered together with the national regional development strategy to determine how to share the burden the reduction potential of various regions implementation potential of the plans and promotion of a highly efficient low carbon economic development model

testing the sticky information phillips curve abstract i consider the empirical evidence for the sticky information model relative to the basic sticky price model conditional on historical measures of inflation forecasts the estimated structural parameters are inconsistent with an underlying sticky information model and the sticky information phillips curve is statistically dominated by the new keynesian phillips curve i find that the poor performance of the sticky information approach is driven by two key elements first the sticky information model underestimates inflation in the 1970s and overestimates inflation since the 1980s second predicted inflation from the sticky information model is excessively smooth

input output analysis of co2 emissions embodied in trade the effects of sector aggregation abstract energy related co2 emissions embodied in international trade have been widely studied by researchers using the environmental input output analysis framework it is well known that both sector aggregation and spatial aggregation affect the results obtained in such studies with regard to the latter past studies are often conducted at the national level irrespective of country or economy size for a large economy with the needed data studies may be conducted at different levels of spatial aggregation we examine this problem analytically by extending the work of su et al su b huang h c ang b w zhou p 2010 input output analysis of co2 emissions embodied in trade the effects of sector aggregation energy economics 32 1 166 175 on sector aggregation we present a numerical example using the data of china and by dividing the country into eight regions it is found that the results are highly dependent on spatial aggregation our study shows that for a large country like china it is meaningful to look into the effect of spatial aggregation

what goes up recent trends in china s energy consumption since 1996 china s energy output has dropped by 17 while primary energy use has fallen by 4 driven almost entirely by shrinking output from coal mines and declining direct use since china is the world s second largest emitter of greenhouse gases it is important to understand the sources of this apparent transformation and whether it portends a permanent change in patterns of energy use this remarkable reversal of the long term expansion of energy use has occurred even as the economy has continued to grow albeit more slowly than in the early 1990s generation of electric power has risen implying a steep fall in end uses particularly in industry available information points to a variety of forces contributing to this phenomenon including rapid improvements in coal quality structural changes in industry shutdowns of factories in both the state owned and non state segments of the economy improvements in end use efficiency and greater use of gas and electricity in households a combination of slowing economic growth industrial restructuring broader economic system reforms and environmental and energy efficiency policies has apparently led to at least a temporary decline in and perhaps a long term reduction in the growth of energy use and therefore greenhouse gas emissions

calculation of embodied energy in sino usa trade 1997 2011 abstract in order to find efficient trade measures to reduce china s energy consumption and to provide theoretical support for the climate talks between china and america we investigate the impact of sino usa trade on energy consumption from the perspective of embodied energy an environmental input output life cycle assessment eio lca model was established to calculate the total energy consumption coefficient the direct consumption coefficient and the complete consumption coefficient of the sectors of the national economies of china and america after taking into consideration the data of every sector of the national economy in sino usa trade energy embodied in the import and export trade between china and america was calculated to verify the real energy flows in sino usa trade the research results suggest the following china is the net exporter of embodied energy in sino usa trade and coal crude oil and natural gas are the major components in 1997 2011 the net exports of china s embodied energy totaled 1523 082 200 t of standard coal the amount of china s energy consumption increased by 895 527 900 t of standard coal and america s energy consumption decreased by 11 871 200 t of standard coal as a result of sino usa trade on this basis corresponding policies and recommendations are proposed

polarization of co2 emissions in china s electricity sector production versus consumption perspectives abstract the inter provincial inequality of per capita co2 emissions in china s electricity sector means that their responsibilities for co2 emission reduction are different considering the spatial separation of co2 emissions in power production and consumption with respect to the large scale inter provincial electricity trade in china this paper innovatively investigates the sub national inequality and polarization degree of per capita co2 emissions in china s electric power sector from the perspectives of both production and consumption the overall tendencies of the sub national polarization degrees of per capita co2 emissions embodied in the both electric power consumption and production in china show an increasing trend the results indicate that the polarization distribution of per capita co2 emissions is still one of the important factors leading to difficulties in achieving the new reduction arrangements the evolution of the bi polarization analysis shows that the grouping results of per capita co2 emissions are different from production and consumption perspectives as well as the high and low emission groups have significantly different characteristics the inequality and polarization degree of per capita co2 emissions in china s electric power sector have changed as the co2 emissions embodied in the electricity trade had been taken into account one size fits all strategies are unlikely to be successful in advancing the provincial cooperation on co2 emissions reduction

co2 content of electricity losses abstract countries are implementing policies to develop greener energy markets worldwide in europe the 2030 energy and climate package asks for further reductions of green house gases renewable sources integration and energy efficiency targets but the polluting intensity of electricity may be different in average than when considering market inefficiencies in particular losses and therefore the implemented policy must take those differences into account precisely herein we study the importance in terms of co2 emissions the extra amount of energy necessary to cover losses with this purpose we use spanish market and system data with hourly frequency from 2011 to 2013 our results show that indeed electricity losses significantly explain co2 emissions with a higher co2 emissions rate when covering losses than the average rate of the system additionally we find that the market closing technologies used to cover losses have a positive and significant impact on co2 emissions when polluting technologies coal or combined cycle close the market the impact of losses on co2 emissions is high compared to the rest of technologies combined heat and power renewables or hydropower to the light of these results we make some policy recommendations to reduce the impact of losses on co2 emissions

hot hands in mutual funds short run persistence of relative performance 1974 1988 the relative performance of no load growth oriented mutual funds persists in the near term with the strongest evidence for a one year evaluation horizon portfolios of recent poor performers do significantly worse than standard benchmarks those of recent top performers do better though not significantly so the difference in risk adjusted performance between the top and bottom octile portfolios is six to eight percent per year these results are not attributable to known anomalies or survivorship bias investigations with a different previously used data set and with some post 1988 data confirm the finding of persistence

embodied energy use in china s industrial sectors abstract as the world s top energy consumer china is facing a great challenge to solve its energy supply issue in this paper energy use from all industrial sectors in china s economy of 2007 was explored by conducting an extended environmental input output analysis we compare the energy consumption embodied in the final demand for goods and services from 29 sectors with the energy demand required for the actual production process in each sector two different viewpoints for sectoral energy use have been presented energy use is directly allocated to the producer entity and energy use is reallocated to sector s supply chain from consumption perspective our results show that considerable amount of energy use is embodied in the supply chain especially for construction and other service activities sectors which is not detected if energy use is allocated on a production basis when further dividing embodied energy consumption into direct energy consumption and indirect energy consumption total indirect energy consumption is much higher than that of total direct energy consumption accounting for 80 6 of total embodied energy consumption in 2007 our results provide a more holistic picture on sectoral energy consumption and therefore can help decision makers make more appropriate policies

china s regional co2 emissions characteristics inter regional transfer and emission reduction policies abstract this paper analyzes the characteristics of china s regional co 2 emissions and effects of economic growth and energy intensity using panel data from 1997 to 2009 the results show that there are remarkable regional disparities among eastern central and western areas regional elasticities of per capita gdp and energy intensity on co 2 emissions which reflect the regional differences in economic development economy structure and restraining function of energy intensity decrease on the emission energy intensity reducing is more effective to emission abatement for provinces with higher elasticity of energy intensity but may not be significant for provinces with lower elasticity the inverse distribution of energy production and consumption regional unfairness caused by institutional factors like energy price and tax system result in inter regional co 2 emission transfer embodied in the power transmission the calculation indicates that the embodied emission transfer was gradually significant after 2003 from eastern area to the central and western areas especially energy production provinces in central area which leads to distortion on the emission and emission intensity the regional emission reduction targets and supporting policies should be customized and consistent with the actual situations rather than setting the same target for all the provinces

analysis of technological progress and input prices on electricity consumption evidence from china abstract this paper establishes a translog cost function model with productivity growth equations to study the influence of technological progress and price changes on electricity production factors and consumption within a unified analytic framework regression is applied to the panel data for seven regions in china during the period 1997 to 2013 the functions of production costs on factor substitution are analyzed based on the regression the influence of electricity price and technological progress on electricity productivity and the rebound effect of electricity are discussed electricity price can significantly and positively influence electricity productivity expressed by the total value of output consumed by unit electricity however the stimulation of technological progress is not notable the rebound effect of electricity computed based on an electricity price breakdown showed that values of the rebound effect in southwestern china and central china were higher than 100 while annual average values of the rebound effect in northeastern china and southern china were 60 39 and 81 47 respectively the area with the lowest annual average value for the rebound effect was northwestern china at 14 96

principal components at work the empirical analysis of monetary policy with large data sets the empirical analysis of monetary policy requires the construction of instruments for future expected inflation dynamic factor models have been applied rather successfully to inflation forecasting in fact two competing methods have recently been developed to estimate large scale dynamic factor models based respectively on static and dynamic principal components this paper combines the econometric literature on dynamic principal components and the empirical analysis of monetary policy we assess the two competing methods for extracting factors on the basis of their success in instrumenting future expected inflation in the empirical analysis of monetary policy we use two large data sets of macroeconomic variables for the usa and for the euro area our results show that estimated factors do provide a useful parsimonious summary of the information used in designing monetary policy copyright 2005 john wiley sons ltd

inflation dynamics and subjective expectations in the united states i introduction this paper analyzes the ability of sticky price models to explain the dynamics of u s inflation when using survey data as proxies for inflation expectations testing sticky price models with survey expectations is attractive since to the extent that survey data correctly capture agents expectations they allow to disregard issues related to the specification of agents expectations functions one neither has to impose untested orthogonality restrictions as required when estimating under the assumption of rational expectations nor has to make restrictive assumptions about the precise form of nonrationality present in agents forecast functions this allows to focus on the question whether the economic models under consideration are correctly specified previous tests of sticky price models performed under the assumption that agents hold rational expectations have generated mixed results prominently fuhrer and moore 1995 have reported that sticky price models do not generate sufficient stickiness for inflation when the output gap is used as a measure of real marginal costs recent evidence however has shown that the empirical performance depends crucially on how one measures real marginal costs the main determinant of inflation according to sticky price models for instance gall and gertler 1999 and sbordone 2002 show that sticky price models perform well once marginal costs are approximated by average unit labor costs 1 it makes an important difference whether sticky price models successfully explain inflation dynamics as a function of output behavior or they relate inflation dynamics to the behavior of unit labor costs given that the ultimate objective is a model explaining the joint behavior of output and inflation the latter case would require an additional empirically plausible theory linking the dynamics of unit labor costs to the behavior of output this paper studies whether the currently popular new keynesian phillips curve nkpc which can be derived from calvo 1983 style sticky price models is able to explain a relationship between inflation on the one hand and output or unit labor costs on the other hand thus we let the data speak whether a theory linking output to costs is warranted once expectations are approximated by data reported in the survey of professional forecasters our main finding is that the nkpc performs equally well with both measures of marginal costs output and unit labor costs whatever measure is used the estimate of the quarterly discount factor is close to one and the point estimate of the degree of price stickiness implies that firms reset their prices roughly every five quarters on average these results suggest that potential nonrationalities in expectations as they show up in surveys have biased previous estimates using output as a measure for marginal costs quite surprisingly the same nonrationalities do not seem to play a role when using unit labor costs here our estimates confirm the results obtained by gall and gertler 1999 and sbordone 2002 who assumed rational expectations we show that the reason for this finding is that approximating the agents information set using the unit labor cost variable rests on more solid grounds than approximating it using the output variable in particular the survey data suggest that the hypothesis of rational expectations implies a too high correlation between lagged output and future inflation expectations we show that this causes the coefficient estimate for output to become negative contrary to what is implied by theory these results suggest that once one takes account of potentially nonrational expectations via survey expectations sticky price models are able to establish a close link between output dynamics and the behavior of inflation to assess the robustness of this finding we include into the price equation lags of various variables and test for their significance