Causality Among Sales,Advertising and Prices: New Evidence from a Multivariate Cointegrated System

The main purpose of this paper is to discern the dynamic causal relationships (in the Granger (temporal) sense) among sales, advertising and prices in the context of the Portuguese car market. The present research (based on multiple cointegration tests preceded by various unit root or non-stationarity tests) is one of the first attempts at putting the sales-marketing mix analysis within a multivariate cointegrated system. The results, based on a three-step procedure (cointegration, VECM and VDCs) confirm that a strong one-way relationship (A->S, A->P) between advertising and sales (prices) is complemented by a feedback relationship (S<->P) between sales and prices.