Abstract
AbstractThis paper looks at the impact of US quantitative easing (QE) on the Indian benchmark stock market index, the Nifty. Using data from September 2008 to June 2019 within an autoregressive distributed lag (ARDL) framework, we find that there is a long-term relationship between the QE, Nifty and other macroeconomic variables. A 10 percentage point increase in QE leads to a 2.1% increase in Nifty returns. From the counter factual analysis it is noted that Nifty would have been lower if there was no QE. The dependence of the Nifty on FII flows and the vagaries of FII flows on the unconventional monetary policies of the USA render the Indian stock market vulnerable. KeywordsQuantitative easingUnconventional monetary policyFinancial crisisEmerging economiesMonetary policy transmissionARDLStock returnsJEL ClassificationC32E52E58G01G15G18
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