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E-TJERA

Do elections affect the exchange rate?

Politiko 2025-05-07 14:54:54

The Euro/Lek exchange rate hit a new historical low on Tuesday, falling below 98 Lek for the first time. The Euro's decline in the second half of April and the first days of May coincided with the final phase of the May 11 election campaign.

For this reason, there are foreign exchange agents who think that this exchange rate performance may have been partially influenced by the election campaign.

If we look at the exchange rate data during the last four elections, namely two weeks before and two weeks after their holding, some fluctuations are observed, but they do not show a uniform trend in all cases.

In the last local elections, on May 14, 2023, in the days before the elections there was a drop in the Euro exchange rate to 110.82 lek (from 111.32 lek which was a week before the elections). After the elections, the exchange rate marked a rapid increase to 113.4 lek, but this increase did not last long and by the end of the month the exchange rate reached even lower levels than before the elections.

In the 2021 general elections (April 25), the “election” fluctuations were not very large and not in the same direction. Even then, there was a very small drop a few days before the elections (from 123.13 to 123.06 lek), but the exchange rate increased again before the elections and in the first days after them. Then, during May, the exchange rate fell again to previous levels, below 123 lek.

In the 2019 local elections (June 30), no decline in the Euro exchange rate was observed in the days leading up to the elections; on the contrary, movements were mainly in the direction of a slight increase. In the last 10 days before the elections, the exchange rate increased from 121.65 lek to 122.65 lek. Subsequently, the exchange rate returned to decline and two weeks after the elections it reached approximately the levels it had been at two weeks before.

In the 2017 general elections (June 25), there was a clearer trend of the Euro’s exchange rate falling before the elections. In the two weeks before the elections, the Euro lost approximately 1.6 lek (from 133.57 lek to 131.98 lek), and then rose again above 132 lek. The level of 131.98 lek was also the lowest recorded for the whole of 2017.

From the observation of the exchange rate performance during election periods, fluctuations are observed, however they do not always show a one-way trend.

Moreover, in recent years the exchange rate has generally been characterized by increased volatility in short-term time intervals. Election periods are no exception and do not exhibit particularly noticeable amplitudes of movement in the annual exchange rate curve.

For this reason too, it is difficult to say whether and to what extent exchange rate fluctuations in an election period are necessarily related to the elections. / Monitor