The Relationship between Consumer Confidence and Financial Market Variables in Turkey during the Global Crisis

Sadullah Çelik, Erhan Aslanoğlu, Pınar Deniz
2010 30 th Annual Meeting of The Middle East Economic Association, Topics in Middle Eastern and African Economies   unpublished
This study examines the relationship between consumer confidence and financial markets for an emerging economy, namely Turkey. We believe that in emerging markets the future is uncertain rather than risky. In such an economy, consumer confidence should be regarded as an economic indicator which derives most of its information content from past and current economic outlook. Therefore, we model consumer sentiment as a function of high frequency financial market variables such as interest rates,
more » ... change rates and the stock exchange index. Using weekly data for the global crisis period of January 2008-October 2009, this paper empirically validates the existence of cointegration between consumer confidence and the financial market variables of interest. Hence, in emerging markets consumer confidence should be viewed as an endogenous variable rather than just reflecting the sensitivity of consumers about the future path of the economy.