Humpage, Owen F. () (Research Department, Federal Reserve Bank of Cleveland) Ragnartz, Javiera () (Handelsbanken Asset Management)
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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Publisher Info
Paper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number
192.
Find related papers by JEL classification: F30 - International Economics - - International Finance - - - General G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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