The COVID-19 pandemic haunting the transmission of the quantitative easing to the exchange rate.

The sudden spread of the COVID-19 pandemic disturbed the entire macroeconomic system and overturned the expectations of financial market participants and decision-makers. Using a TVP-BVAR-SV model, I investigate the transmission of the quantitative easing (QE) to the exchange rate and the business credit in the Eurozone during the pre-and post-COVID-19 outbreak. I find that the responses of the exchange rate EUR/USD to monetary policy shocks vary over time. In particular, I show that the QE policy does not generate the expected effect on the exchange rate during the COVID-19 pandemic period. The results imply that the unforeseen COVID-19 crisis has disturbed and modified investors' behavior.