The relationship between exchange rate and consumer confidence index: The case of MIST countries

This study investigates the causal linkage between consumer confidence index and exchange rate in Mexico, Indonesia, South Korea and Turkey regarded as significant emerging economies, and grouped and defined as MIST countries by Jim O'Neill in 2011, over the period of 2008 Global Financial Crisis (2008:10-2017:04). Toda- Yamamoto (1995) approach is employed as methodology to detect the causal linkages between these two variables. The findings present that the exchange rate is the long-run determinant of consumer confidence index in both Mexico and South Korea. In these countries, the causal relationship is unidirectional. On the other hand, there is unidirectional and long-run causal relationship running from consumer confidence index to exchange rate in Turkey. However, there is no empirical evidence about the existence of causal linkage between consumer confidence index and exchange rate in Indonesia. Keywords: Exchange Rate, Consumer Confidence Index, MIST Countries, Toda-Yamamoto