Advertising and Aggregate Consumption: A Bayesian DSGE Assessment

Benedetto Molinari and Francesco Turino

Economic Journal, 2018, vol. 128, issue 613, 2106-2130

Abstract: Aggregate data reveal that in the US, advertising absorbs 2% of GDP. Because the purpose of brand advertising is to foster sales, we ask whether such spending appreciably affects aggregate consumption and economic activity. This question is addressed by developing and estimating a dynamic general equilibrium model in which households’ preferences for differentiated goods depend on brand advertising. Estimated results for the US economy indicate that in the long‐run, the presence of advertising raises aggregate consumption, investment, and hours worked, eventually fostering overall economic activity. We also find that advertising has a relevant impact on fluctuations in consumption and investment.

Date: 2018
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https://doi.org/10.1111/ecoj.12514

Related works:
Working Paper: Advertising and Aggregate Consumption: A Bayesian DSGE Assessment (2016)
Working Paper: Advertising and Aggregate Consumption: A Bayesian DSGE Assessment (2015)
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