No. 192. Swedish Intervention and the Krona Float, 1993-2002

by Owen F. Humpage and Javiera Ragnartz

April 2006

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

Intervention, Foreign-exchange rates, Swedish Riksbank, Krona.

JEL

F3, G15.