Central bank intervention and exchange rates: the case of Sweden

Abstract

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Swedish Intervention and the Krona Float, 1993-2002

“…They also found-unlike the present paper-that larger interventions had a higher probability of success than small interventions. On the other hand, our results are similar to those of Aguilar and Nydahl (2000), who also found that Swedish interventions were generally ineffective. Note: We chose these sample periods to correspond with those in tables 3 through 6.…”

“…Our overall results are similar to Aguilar and Nydahl (2000), the only other paper to study official Riksbank intervention during the krona float. 2 They investigated daily interventions in Swedish kronor against German marks and U.S. dollars from January 7, 1993, to December 30, 1996, using a multivariate extension of the GARCH-M model and found little evidence that Riksbank interventions affected either the level or the volatility of day-to-day, krona-dollar or krona-mark exchange rates.…”

The effects of Japanese foreign exchange market interventions on the yen/U.S. dollar exchange rate volatility

“…Over the past two decades, the effects of central bank interventions in foreign exchange markets on exchange rate volatility have been the focus of a number of empirical studies (see, e.g., Dominguez 1998 andAguilar/Nydahl 2000). Researchers have not only been interested in the magnitude of the effect of central bank interventions on exchange rate volatility but also in the sign of this effect.…”

The effectiveness of central bank intervention in the EMS: The post 1993 experience

“…Nevertheless, for the whole period (1977)(1978)(1979)(1980)(1981)(1982)(1983)(1984)(1985)(1986)(1987)(1988)(1989)(1990)(1991)(1992)(1993)(1994) central bank intervention generally leads to higher exchange rate volatility. Aguilar and Nydahl (1998) investigate the impact of interventions on the level and volatility of the Swedish Krona (SEK) /USD-and SEK/DEM-rate from January 1993 to November 1996, a period when the SEK was floating. A bivariate GARCH-framework and as a second approach, implied volatilities from currency options were used.…”

“…2 There are few other papers dealing with different currency pairs: Fischer and Zurlinden (1998) with the CHF/USD exchange rate, Aguilar and Nydahl (1998) with the USD/SEK and DEM/SEK exchange rates. Mundaca (1993) analyzed the NOK against a trade-weighted basket of foreign currencies and against the ECU.…”