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Currency returns during democratic transition: evidence from Tunisia

Ghadi Saad (Rennes School of Business, Rennes, France)
Taoufik Bouraoui (Rennes School of Business, Rennes, France)

Managerial Finance

ISSN: 0307-4358

Article publication date: 29 May 2019

Issue publication date: 8 August 2019




The purpose of this paper is to investigate the question whether democratic transition elections influence currency returns. Also, the paper examines the behavior of the currency market around these elections in Tunisia.


Empirical data are collected from the International Monetary Fund, the Central Bank of Tunisia and the Tunisian stock market websites. The paper employs event study analysis using a market model and investigates abnormal currency returns around the four election events that occurred during the period of democratic transition in Tunisia (2011–2015). A robustness test is also conducted to control for monetary policy effects.


The results indicate that democratic transition does impact currency returns. The authors did not find any significant effect on the events dates (t0). However, event windows around the elections days reacted significantly to the events. The authors notice a significant decrease in cumulative abnormal returns (CARs) at event periods leading up to the elections. Post-event windows perceived negative CARs in the first and second election, and positive CARs in the last two elections. The authors also find that the change in the victors of the elections does not cause major differences to CARs. Further, the authors do not find significant results when controlling for inflation and interest rate.


There is no evidence yet on how democratic transition elections can affect currency returns. Given that currency is a leading indicator of the performance of the financial sector, this paper should provide policymakers with new evidence on the response of currency returns to democratic transition.



Saad, G. and Bouraoui, T. (2019), "Currency returns during democratic transition: evidence from Tunisia", Managerial Finance, Vol. 45 No. 7, pp. 966-979.



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