Empirical Analysis of the Relationship between Consumer Confidence Index and Exchange Rate in Turkey

Abstract

The aim of this study is to examine the short and long term relations between exchange rate and consumer confidence index. In the study, two variables in total are discussed as consumer confidence index and dollar selling rate and a data set consisting of 95 observations in a monthly frequency spanning the 2003:12-2011:12 period is applied for each variable within the analysis. The consumer confidence index is based on the index prepared by Turkey Statistics Institution (TSI) and Republic of Turkey Central Bank (RTCB). As for exchange rate the monthly average value of the Dollar selling rate is taken as basis. Examined the empirical findings obtained, it is observed that there is both a short-term and a long-term relation between consumer confidence index and exchange rate within the period investigated in Turkey. The findings can be interpreted in a way as that the exchange rate is one of the factors that shape consumers’ expectations regarding the future of the economy.