Will the Exits Be Unconventionally Painful? Key Takeaways for the Financial Sector From Quantitative Easing

Unconventional Monetary Policy (UMP) measures have gained prominence since the financial crisis 2008 and have almost transformed into the "new normal" for central banks during crisis recovery. India followed suit and introduced various UMP measures during the recent COVID-19 crisis to revive the economy from a pandemic-hit slowdown. We evaluate the impact of UMP measures adopted by RBI during the wake of the COVID-19 pandemic on Indian financial markets. We found evidence that UMP pass-through is in the right direction by boosting asset prices, lowering interest rates and bond yields in the financial market. In light of recent UMP exits by various central banks, we analyse the case of UMP exits in India and intend to provide policy recommendations for smoother exits.