Analysis of the Relationship between Household and Real Sector Expectations in Turkey

The relationship between household and real sector expectations and economic indicators has been frequently discussed in the literature. On the contrary, the existence and dimensions of the relationship between household expectations and real sector expectations are investigated between the sub-indices of Consumer Confidence Index (CCI) and the Real Sector Confidence Index (BCI) in this study. Unlike the literature, the DCC-GARCH method, which estimates time-varying (dynamic) conditional correlations, is used in this study for the period between January 2007-April 2020. Another difference of the study from the literature is that it tries to measure the effects of the USD/TL exchange rate and the COVID-19 outbreak on the dynamic relationship by panel data analysis. The findings revealed that the relationship between CCI and BCI sub-indices do exists in a general manner and there is a statistically significant relationship between the CCI sub-indices which represent the household expectations regarding the general economy and unemployment, and the BCI sub-indices which represent the real sector expectations regarding the general course of the economy and order amounts. The panel data analysis findings indicate that the USD/TL exchange rate adversely affects the relationship between CCI and BCI sub-indices, whereas the COVID-19 outbreak does not affect the relationship.