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Swedish intervention and the Krona float, 1993–2002

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Author Info
Owen F. Humpage
Javiera Ragnartz
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.

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Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 0514.

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Date of creation: 2005
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Handle: RePEc:fip:fedcwp:0514

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Keywords: Foreign exchange administration Krona Swedish

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Rasmus Fatum & Michael M. Hutchison, . "ECB Foreign Exchange Intervention and the Euro: Institutional Framework, News and Intervention," EPRU Working Paper Series 02-10, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
  2. Lucio Sarno & Mark P. Taylor, 2001. "Official Intervention in the Foreign Exchange Market: Is It Effective and, If So, How Does It Work?," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 839-868, September. [Downloadable!] (restricted)
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  3. Baillie, Richard T. & Humpage, Owen F. & Osterberg, William P., 2000. "Intervention from an information perspective," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 10(3-4), pages 407-421, December. [Downloadable!] (restricted)
  4. Dominguez, Kathryn M. E., 2003. "The market microstructure of central bank intervention," Journal of International Economics, Elsevier, vol. 59(1), pages 25-45, January. [Downloadable!] (restricted)
  5. Humpage, Owen F., 2000. "The United States as an informed foreign-exchange speculator," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 10(3-4), pages 287-302, December. [Downloadable!] (restricted)
  6. Chang, Yuanchen & Taylor, Stephen J., 1998. "Intraday effects of foreign exchange intervention by the Bank of Japan1," Journal of International Money and Finance, Elsevier, vol. 17(1), pages 191-210, February. [Downloadable!] (restricted)
  7. Merton, Robert C, 1981. "On Market Timing and Investment Performance. I. An Equilibrium Theory of Value for Market Forecasts," Journal of Business, University of Chicago Press, vol. 54(3), pages 363-406, July. [Downloadable!] (restricted)
  8. Dominguez, Kathryn M & Frankel, Jeffrey A, 1993. "Does Foreign-Exchange Intervention Matter? The Portfolio Effect," American Economic Review, American Economic Association, vol. 83(5), pages 1356-69, December. [Downloadable!] (restricted)
  9. Henriksson, Roy D & Merton, Robert C, 1981. "On Market Timing and Investment Performance. II. Statistical Procedures for Evaluating Forecasting Skills," Journal of Business, University of Chicago Press, vol. 54(4), pages 513-33, October. [Downloadable!] (restricted)
  10. Humpage, Owen F, 1999. "U.S. Intervention: Assessing the Probability of Success," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(4), pages 731-47, November.
  11. Aguilar, Javiera & Nydahl, Stefan, 2000. "Central bank intervention and exchange rates: the case of Sweden," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 10(3-4), pages 303-322, December. [Downloadable!] (restricted)
  12. repec:rus:hseeco:21608 is not listed on IDEAS
  13. Popper, Helen & Montgomery, John D., 2001. "Information sharing and central bank intervention in the foreign exchange market," Journal of International Economics, Elsevier, vol. 55(2), pages 295-316, December. [Downloadable!] (restricted)
  14. Cheung, Yin-Wong & Chinn, Menzie David, 2001. "Currency traders and exchange rate dynamics: a survey of the US market," Journal of International Money and Finance, Elsevier, vol. 20(4), pages 439-471, August. [Downloadable!] (restricted)
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