[1] Without the forceful responses of fiscal, monetary and prudential authorities the economic and social costs of this crisis would have been significantly higher. Governments, in particular, have stabilised aggregate demand and incomes by absorbing economic and financial risks of the private sector as the crisis unfolded.
Through the generous issuance of guarantee schemes, governments secured a continuous flow of credit to firms, which supported economic growth and protected financial stability. Monetary policy has complemented these efforts by providing ample liquidity and restoring favourable financing conditions. As a consequence, the policy response to the pandemic has visibly intensified the interdependencies between sovereigns, banks and firms. It has created a “sovereign-bank-corporate” nexus.