This study investigates the relationship between consumer confidence index and exchange rate by employing cointegration method and causality analysis for the period 2012:01-2018:06 in Turkey. There is a consensus in the literature that consumer confidence plays an important role in predicting and understanding cyclical fluctuations. In small open economies, the exchange rate is both a portfolio preference and an economic policy variable. For this reason, it is an important variable that functions as a psychological barometer on the future decisions of economic agents beyond the changes in macroeonomic aggregates. Our emprical findings indicate that there is a unidirectional relationship running from the exchange rate to the consumer confidence index. Also, exchange rate shocks has statistically significant and persistent effect on the consumer confidence index.
Keywords: Consumer Confidence, Exchange Rate, Cointegration Method, Causality Analysis, Turkish Economy