Working Paper

Swedish intervention and the Krona float, 1993–2002

Abstract: Using a set of standard success criteria, we show that Riksbank foreign-exchange interventions between 1993 and 2002 lacked forecast value; that is, the observed number of successes was not significantly greater--and usually substantially smaller--than the number one would anticipate given the martingale nature of exchange-rate movements. Under some success criteria, the Riksbank exhibited negative forecast value, implying that the market could have profited by taking a position opposite that of the bank. Moreover, the likelihood of success was independent of such conditioning factors as the amount of a transaction, the time lapses between interventions, or the number of foreign currencies involved. As such, Riksbank intervention could not operate through an expectations or signaling channel.

Keywords: Foreign exchange administration; Krona, Swedish;

https://doi.org/10.26509/frbc-wp-200514

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers (Old Series)

Publication Date: 2005

Number: 0514