Tina Adatia: You talked about this U-shaped curve, and right now we're of course in sort of the severe near-term pain and deep losses as we fall on this I trajectory. But one bright spot that we've seen so far is the rapid and significant policy response that we're seeing both from the monetary and the fiscal side. So what has been different this time in the way that governments have stepped up compared to past recessions? And do you think they will work to support the economy through this crisis?
Joachim Fels: I think what's different is that the policy response, both fiscal and monetary, has been fast and furious. So policy, or put differently, policies moving with unprecedented speed and scope. There are basically two reasons for this. First of all, if you look at what central banks did, they had the playbook available from the last crisis. They introduced all of these measures in 2008/2009 and they could just turn the switch now and bring them on again.
So large scale asset purchases, various forms of credit easing, multiple funding for lending programs, and so on. Basically, as I said before, they just had to turn the switch.
The second reason why the response has been faster is on the government side. So for governments, it was easier to move fast because the recession didn't come as a surprise. They caused it in a way by imposing the containment measures. And I think governments knew what they were doing, that these containment measures would lead to a falloff, a rapid falloff in economic activity. So almost immediately, they got to work to cushion the blow for households and firms. So that's why the response is different. It's larger and it's also faster.
And then looking at central banks, central banks are really helping governments to do what's necessary by cutting interest rates, by buying large amounts of government bonds as we can see on this slide. So central banks stepped up not only as lenders of last resort for banks and other financial institutions, but they also stepped up as lenders of last resort for governments. And what we are seeing now in this crisis is a much closer implicit, and in some cases even explicit, coordination and cooperation between the monetary and the fiscal authorities.
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