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John, here is the disclaimer: I am not an authority on Volvo electronics and hate to diagnose stuff I have not had problems with in a car other than my own but maybe this will help, without me helping you make it worse.
TP31903/1 1988, Rex/Regina. This was modified to include 1991 updates but I do not think there were any changes in the two wire knock sensor circuit.
"Conditions for fault code: With a hot engine and engine speeds above 2000 RPM a test is carried out of the signal from the knock sensor. If the signal is below a certain level, ***the ignition is retarded***(car runs like shit) and fault code 1 4 3 is set.
Since the signal from the knock sensor cannot be measured without special equipment, only the wires are measured.
Caused of Fault: Break or short circuit to ground in the wires of knock sensor. (or) Connection resistance in contacts." (If you trust OBD1.)
That being said, all it says is the signal is faulty or absent during it's internal testing at stated above. There is no indication that it is caused by a bad pump, dirty air filter or bad plugs, ah, but again this is OBD1.
Two wires, black is grounded inside the Rex ign control module and the green is the signal wire, screened (shielded by the ground?). My interpretations of the test that can be done with an ohm meter, unpluged at the Rex control module and the knock sensor the ctrl module connection points to 12 black(ground) and 13 red (signal) should be an open circuit (infinite resistance) meaning no short to ground.
I'd check continuity for each wire from the knock censor connector to the control module connector. These two wires go through a six pin connector located near the firewall on the drivers side. Pull this apart and check for corrosion. Worth a check too, corrosion at the Ign control module connection.
Summery, it should be a shorted wire, a broken wire, bad connection or another bad knock sensor and hopefully not a bad control module. You may have several unrelated problems going on at the same time if you had clear the code and the car runs bad when cold and before 2000RPM.
Before unplugging anything take what ever precautions required by the FAQ, like disconnecting the battery.
Tom
Edit: make sure the two wires are not shorted together too, Check while unplugged on both ends.
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