Financial Flows and Exchange Rate Dynamics: Evidence from Sweden

2025

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This paper provides crucial insights into how central bank foreign exchange operations impact exchange rates, offering valuable implications for reserve management and monetary policy.

* Analyzes two distinct episodes of Sveriges Riksbank's foreign exchange operations: foreign currency purchases (2021-2022) and domestic currency purchases (2023-2024).
* Employs daily data and local projections to identify unanticipated operation shocks and their effects on the SEK against the EUR and USD.
* Finds that FX operations have gradual, short-lived effects that are regime-dependent and exhibit currency-specific patterns over longer horizons.

Financial Flows, Exchange Rates, Central Bank Operations, Sweden, Monetary Policy

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