Scandinavian Working Papers in Economics

Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)

No 456: Financial Flows and Exchange Rate Dynamics: Evidence from Sweden

Katja Artta, Marianne Nessén, Anders Vredin and Ettore Savoia ()
Additional contact information
Katja Artta: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Marianne Nessén: Monetary Policy Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Anders Vredin: Monetary Policy Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Ettore Savoia: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden

Abstract: We examine how central bank foreign exchange (FX) operations affect nominal exchange rates by exploiting two large operations by Sveriges Riksbank: foreign currency purchases during 2021–2022 and domestic Swedish krona (SEK) purchases—that is, FX forward sales— during 2023–2024. Using daily data and local projections, we identify unanticipated operation shocks to the SEK against the euro (EUR) and the U.S. dollar (USD). On average, we observe sign consistency—depreciation during FX purchases and appreciation during SEK purchases. Three main results emerge: (i) effects unfold gradually but fade quickly, becoming statistically insignificant after about ten trading days; (ii) they are regimedependent, with FX purchases inducing larger depreciations and domestic currency purchase yielding smaller, delayed appreciations; and (iii) FX purchases generate long-run (11-60 days) currency-specific effects, with a stronger SEK depreciation against the EUR relative to the USD. However, results are more uniform across currencies in the short run (1–10 days) and throughout the domestic currency purchase period.

Keywords: Foreign exchange operations; Local Projections; exchange rates

JEL-codes: E58; F31; F33

Language: English

47 pages, November 1, 2025

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