Abstract
The recession that most of the world economies have been facing in the last years has caused a great interest in the study of its macroeconomic effects. In this context, a debate has resurged regarding the advertising investment, as for its potential capacity to impel the consumer spending and to impact positively on the economic recovery. This idea, sustained in the so-called Galbraith's hypothesis, constitutes the core of this paper, where the main objective is to test that hypothesis by means of an empirical analysis. In this study, we focus on the Spanish case and the data correspond to the period 1976 -2010. A cointegration analysis is carried out, using two different approaches (Engle-Granger test and Gregory-Hansen test, respectively), to determine if there is any relationship between the advertising investment and six macromagnitudes (GDP, National Income, Consumption, Savings and Fixed Capital Formation), as well as the registered unemployment rate. Based on the results obtained, we conclude that Galbraith's hypothesis is not fulfilled for the Spanish case.
Highlights
More concretely the advertising investment, as a powerful motor, with macroeconomic effects, to boost the economic growth. He claims that in case of an increase of the advertising investment this would cause a rise in the global consumption and, it would lead to job creation and an increase in the national income and, in the standard of living
The antecedent to Galbraith’s hypothesis relies, in opinion of Nevett (1996), on the research carried out by Borden (1942), who finds in the period 1919-1940 that the oscillations in the monthly advertising investment experienced a certain delay in relation to those registered in a production index that the author had created on his own and all these using data of the USA
This evident controversy shows the enormous complexity of the problem, but this has not involved a decline in the interest of researchers in finding new conclusions by virtue of methodological applications which study the interaction of different macroeconomic variables in scenarios that have not been analyzed yet, as it happens in this paper with the delimitation of the scope of the study to the case of Spain
Summary
In his work The New Industrial State (1967), considers the advertising investment as an outstanding instrument to raise the global consumption and to impact positively on job creation and national income, without forgetting the impact on savings and the Gross Domestic Product (GDP). He conceives the publicity, and more concretely the advertising investment, as a powerful motor, with macroeconomic effects, to boost the economic growth.
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