Youve been hired to determine the impact of advertising on gross sales revenue for Four Musketeers candy

You€™ve been hired to determine the impact of advertising on gross sales revenue for €œFour 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 you€™re 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 1985€“2009 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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Year Advertising Sales 1981 30 1982 35 1983 36 320 1984 39 1985 360 40 1986 390 45 1987 400 50 410 1988 50 1989 400 50 1990 450 53 1991 470 55 1992 500 60 1993 500 60 490 1994 60 1995 580 65 1996 600 70 700 1997 70 1998 790 60 1999 730 60 2000 720 60 2001 800 70 2002 820 80 830 2003 80 890 2004 80 2005 900 80 2006 850 75 2007 840 75 2008 850 75 2009 850 75 Datafile = MOUSE12