Advertising, Consumption and Economic Growth: An Empirical Investigation

Günther Rehme and Sara-Frederike Weisser

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

Abstract: It is sometimes argued that more advertising raises consumption which in turn stimulates output and so economic growth. We test this hypothesis using annual German data expressed in terms of GDP for the period 1950-2000. We find that advertising does not Granger-cause growth but Granger-causes consumption. Consumption, in turn, Granger-causes GDP growth. The data imply that the immediate impact of more advertising on consumption is positive. However, the long-run effect is negative. Further- more, the immediate impact of higher consumption on growth is negative. But the long-run effect is positive. These results raise interesting questions for standard theory, political debates and advertising practioners.

Date: 2007-02
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Published in Darmstadt Discussion Papers in Economics . 178 (2007-02)

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Related works:
Working Paper: Advertising, Consumption and Economic Growth: An Empirical Investigation (2007)
Working Paper: Advertising, Consumption and Economic Growth: An Empirical Investigation (2007)
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