Abstract
Timely information on the state of the economy is indispensable for sound policy making, particularly for developing economies navigating through the volatile economic environment produced by the global financial crisis. This paper develops a consumer sentiment index for Turkey using web search data provided by Google Trends. Our Google-based index (GBI) is highly correlated with the official Consumer Confidence Index (CCI) and predicts the CCI, but not vice versa. Both short-term and long-term movements in the GBI are informative in predicting the CCI, even after controlling for the key economic and financial determinants of the CCI. The GBI can also be useful in predicting consumer spending; however, most of its predictive power comes indirectly from its power in predicting the CCI.
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