Relation of Causality Between Consumer Confidence Index and Macroeconomic Factors: The Case of Turkey

Abstract

Various leading indicators such as consumer confidence index are utilized in measuring future economic expectations. This study examine empirically with Johansen Cointegration test and Granger Causality Analyzes using monthly data from January 2011 and 2018 August period with regards to the effects of inflation, changes in exchange rates and the weighted average funding on consumer confidence index in Turkey.  It is determined that there is a long-run relationship between macroeconomic variables and consumer confidence index. Bidirectional causality between exchange rate changes and consumer confidence index has been observed. One-way causality from inflation to weighted average funding cost and consumer confidence index, from consumer confidence index to weighted average funding cost and from change in dollar exchange rate to inflation has been detected. It has been found that the dollar exchange rate and inflation play an important role in explaining the consumer confidence index.

Keywords:

Consumer Confidence Index, Weighted Average Funding Cost, Inflation, Changes In Exchange Rates, Causality.