CONSUMER CONFIDENCE, STOCK PRICES AND EXCHANGE RATES: THE CASE OF TURKEY

During the last few years a large number of economist and institutions have expressed increasing concerns regarding to importance of confidence on economic variables. They believe that increase in economic agents’ confidence will affect economic variables positively. The main objective of this study is to investigate the effect of Consumer Confidence Index (CCI) on real exchange rate and stock market in Turkey over the 2002:1 – 2008:12 periods by utilizing several econometric techniques. Most of the empirical studies have examined the effect of macroeconomics variables on confidence and ignored the effect of confidence on macroeconomics variables. In this study, we will try to fill up this gap by examining the effect of CNBC-e Consumer Confidence Index on reel exchange rate and stock market in Turkey. The results showed that Granger-causality run from stock price and real exchange rate to CCI but not vice versa. Also, the results from GARCH-M and OLS model showed that CCI affect reel exchange rate and stock price.