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A Cointegration Analysis of Car Advertising and Sales Data in the Presence of Structural Change

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  • Vicente Esteve
  • Francisco Requena

Abstract

This paper examines whether there is a long-run stable equilibrium relationship between advertising and sales across the market segments of the UK car industry over the period 1971-2001. In order to achieve this goal, we allow for structural breaks in the series using cointegration techniques. The results show the existence of long-run equilibrium relationships in all six market segments, although in four of them the relationship is not stable. In general, one structural change is detected in the late 1970s and another in the early 1990s, coinciding with two economic recessions. When we do not account for structural changes, the estimated long-run elasticities of advertising on sales are seen to be substantially downwardly biased. Finally, a noticeable increase is observed in long-run elasticities in most car market segments during the nineties with respect to previous decades.

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  • Vicente Esteve & Francisco Requena, 2006. "A Cointegration Analysis of Car Advertising and Sales Data in the Presence of Structural Change," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 13(1), pages 111-128.
    • Handle: RePEc:taf:ijecbs:v:13:y:2006:i:1:p:111-128
    DOI: 10.1080/13571510500520036
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    More about this item

    Keywords

    Advertising; Sales; Cointegration; Structural Break; Car Industry; JEL Classifications: C12; C22; L10;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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