Responding to QE taper from the receiving end

This paper analyses the spillovers of quantitative easing (QE) and their taper in India, as there could be country-specific nuances that qualify the inferences thrown up by cross-country studies, and therefore, can enrich and empower the on-going debate. Using a combination of event study analyses, generalized method of moments and VAR estimates, it finds that QEs have significantly altered monetary conditions in India. Among the QEs, QE1 had the largest impact and taper announcement had a strong negative impact, with the spillovers working mainly through the portfolio rebalancing channel, followed by the liquidity channel. Going forward, emerging economies are likely to take into account these spillovers in the conduct of monetary policy, with implications for both policy autonomy and global welfare.