Advertising, Consumption and Economic Growth: An Empirical Investigation

Günther Rehme and Sara-Frederike Weisser

No 178, Darmstadt Discussion Papers in Economics from Darmstadt University of Technology, Department of Law and Economics

Abstract: It is sometimes argued that more advertising raises consumption which in turn stimulates output and so economic growth. We test this hypothe- sis 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.

Keywords: Advertising; Consumption; Economic Growth (search for similar items in EconPapers)
JEL-codes: E2 M3 O4 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (1)

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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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