Dispelling the Myth

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Abstract
This paper investigates attempts to test the proposition that advertising is an important factor influencing total consumption. It surveys prior work in the area and discusses a more useful definition of the expression ‘changes in advertising cause changes in consumption’ than has been implied in most past tests of the relationship. The criteria for testing causality involve comparing the forecasting ability of a univariate consumption model with a bivariate model of consumption and advertising. These models are built using the powerful Box-Jenkins techniques of time series analysis. A study of the relationship in the United Kingdom is reported covering the period 1969 to 1980. The results do not support the hypothesis that total advertising expenditures alter aggregate consumer behaviour.

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