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Advertising, Consumption and Economic Growth: An Empirical Investigation

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  • Rehme, Günther
  • Weisser, Sara-Frederike

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.

Suggested Citation

  • Rehme, Günther & Weisser, Sara-Frederike, 2007. "Advertising, Consumption and Economic Growth: An Empirical Investigation," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 35975, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:35975
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/35975/
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    References listed on IDEAS

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    8. Ashley, R & Granger, C W J & Schmalensee, R, 1980. "Advertising and Aggregate Consumption: An Analysis of Causality," Econometrica, Econometric Society, vol. 48(5), pages 1149-1167, July.
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    Cited by:

    1. Benedetto Molinari & Francesco Turino, 2009. "Advertising, Labor Supply and the Aggregate Economy. A long run Analysis," Working Papers 09.16, Universidad Pablo de Olavide, Department of Economics.

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    More about this item

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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