Youve been hired to determine the impact of advertising on gross sales revenue for Four Musketeers candy bars. Four Musketeers has the same price and more or less the same ingredients as competing candy bars, so it seems likely that only advertising affects sales. You decide to build a model of sales as a function of advertising, but youre not sure whether a distributed lag or a dynamic model is appropriate.
Using data on Four Musketeers candy bars from Table 12.2, estimate both of the following equations from 19852009 and compare the lag structures implied by the estimated coefficients.
Table 12.2 Data for the Four Musketeers Exercise
a. Distributed lag model
b. A dynamic model
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