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This paper examines empirically how political turmoil in a developing country undergoing extensive reforms affects the behaviour of the foreign exchange market. We develop a simple time-series model and apply it to the Polish foreign exchange market in order to test the following hypotheses: the first hypothesis is that the conditional variance of the Polish currency (zloty) is time-varying and the second hypothesis is that political turmoil has an adverse impact on the exchange market volatility by affecting directly the conditional variance of the zloty. Weekly data from the Polish free foreign exchange market support the two hypotheses. The results of this paper may represent valuable information for other reforming countries as well as researchers studying the financial price formation in a developing country experiencing extensive reforms. [ABSTRACT FROM AUTHOR]