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Working Paper

Swedish Intervention and the Krona Float, 1993-2002

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.

Suggested Citation

Humpage, Owen F., and Javiera Ragnartz. 2005. “Swedish Intervention and the Krona Float, 1993-2002.” Federal Reserve Bank of Cleveland, Working Paper No. 05-14.