in reality depends on the state of the economy : under acute financial market stress, the presence of financial frictions and balance sheet constraints implies severe non - linearities that translate into much larger contractionary effects brought on by a tightening of financial conditions. in turn, this means that the beneficial impact of policy measures that avert the tightening becomes increasingly large. this can be illustrated by econometric analysis that quantifies the impact of a tightening in financial conditions, not only on the mean of real gdp growth but also on different parts of its empirical distribution via quantile regression. a tightening of such conditions is associated with a stronger decline in the lower quantiles of euro area real gdp growth compared to the upper quantiles. [ 10 ] given the severity of the shock associated with the covid - 19 crisis, a tightening in financial conditions in the current environment would be expected to have an impact several times larger than the one captured by the average elasticities employed to quantify the impact of the policy package on growth and inflation that i mentioned earlier ( chart 11 ). chart 11 impact on real gdp growth of a tightening of credit conditions under different states of the economy ( year - on - year percentage change ) https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp200624 ~ d102335222. en. html 10 / 13 7 / 15 / 2020 the ecb ’ s monetary policy response to the pandemic : liquidity, stabilisation and supporting the recovery source : ecb calculations. notes : the chart shows the response of real gdp growth to a tightening in financial conditions ( one standard deviation ) measured through a financial conditions index. the right panel shows the impact across quantiles of the gdp distribution. in this context, the role of the ecb ’ s monetary policy measures as a backstop against adverse tail risks has been crucial. by averting a meltdown of financial markets, providing a liquidity backstop, curbing the excessive valuation of risk and preventing the most adverse macro - financial feedback loops that could trigger a credit crunch, our monetary policy package reduces the magnitude of risks around the central tendency of the economic outlook. it is analytically challenging to provide an exact quantification of this dimension in terms of the macroeconomic support of our policy measures, but let me provide an example in the case of the tltros. while the amplification effects

##an and arthur saint guilhem for their contributions to this speech. [ 2 ] see my blog post entitled “ the monetary policy response to the pandemic emergency ”, 1 may 2020 and “ eurosystem staff macroeconomic projections for the euro area ”, june 2020, european central bank. https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp200624 ~ d102335222. en. html 12 / 13 7 / 15 / 2020 the ecb ’ s monetary policy response to the pandemic : liquidity, stabilisation and supporting the recovery [ 3 ] for further discussion, see my blog post entitled “ expanding the pandemic emergency purchase programme ”, 5 june 2020. [ 4 ] for more on the tightening of financial conditions, see my blog post from 5 june 2020 ( op. cit. ). [ 5 ] see my speech entitled “ monetary policy and below - target inflation ”, 2 july 2019. [ 6 ] for a more extensive discussion of duration risk, see my speech entitled “ the yield curve and monetary policy ”, 25 november 2019. [ 7 ] see my speech entitled “ pandemic central banking : the monetary stance, market stabilisation and liquidity ”, 19 may 2020. [ 8 ] complementary support is being provided by other policy spheres. first, the easing of capital requirements by supervisory authorities provides banks with an ample buffer to absorb a crisis - related depletion of their capital, diffusing deleveraging pressures. second, credit guarantee schemes have been put in place by euro area governments, facilitating the flow of funds from financial intermediaries to the private sector. [ 9 ] the gap between gross and net funding reflects the maturities of the bridge ltros that were introduced in march of this year and the first operation under tltro ii, as well as voluntary early repayments of other tltro ii operations. [ 10 ] this approach has been popularised recently by adrian, t., boyarchenko, n., and giannone, d. ( 2019 ), “ vulnerable growth ”, american economic review, vol 109 ( 4 ), pp. 1263 - 89. [ 11 ] this result draws from a model - based counterfactual exercise in which it is assumed that non - linear real - financial feedback loops materialise in a more adverse manner than was actually the case since