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Impact of US UMP on Indian Stock Market

In: Studies in International Economics and Finance

Author

Listed:
  • Moumita Paul

    (Gokhale Institute of Politics and Economics)

  • Kalluru Siva Reddy

    (Gokhale Institute of Politics and Economics)

Abstract

This 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.

Suggested Citation

  • Moumita Paul & Kalluru Siva Reddy, 2022. "Impact of US UMP on Indian Stock Market," India Studies in Business and Economics, in: Naoyuki Yoshino & Rajendra N. Paramanik & Anoop S. Kumar (ed.), Studies in International Economics and Finance, pages 647-662, Springer.
    • Handle: RePEc:spr:isbchp:978-981-16-7062-6_33
    DOI: 10.1007/978-981-16-7062-6_33
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    More about this item

    Keywords

    Quantitative easing; Unconventional monetary policy; Financial crisis; Emerging economies; Monetary policy transmission; ARDL; Stock returns;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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