Any textbook in Macroeconomics provides more detailed answer than I can do here. But in short: expansionary monetary policy increases the risk that companies will accumulate bad credits. Restrictive monetary policy increases bankruptcy risk for companies. There are also numerous effects of monetary policy on the exchange rates, dependent on whether the country in question is a net exporter or net importer, etc. etc.

There is a direct correlation, affecting both availability & cost of credit.

Megersa Debela Daksa Ethier quantitative or qualitative, the monetary authority should time intervention at first and choose the suitable instruments, but keeping the financial market stable is the better choice from my point of view.

ضرورة تحقيق التوازن بين عناصر القطاع المالي الذي يُعد ركيزة أساسية لتحقيق الإستقرار المالي، ويتمثل دور البنك المركزي في هذا الصدد في قيامه بمراقبة كفاءة وإستقرار القطاع المصرفي (إضافة إلى دوره في وضع السياسة النقدية)، كما تقوم الهيئة العامة للرقابة المالية بالإشراف على القطاع المالي غير المصرفي، إضافة إلى المجلس التنسيقي، وتبرز هنا ضرورة تطوير الأسواق المحلية وذلك لإرتباط فاعلية التنسيق بين السياستين المالية والنقدية بدرجة تطور الأسواق مما يُوفر بدائل أخرى لتمويل العجز المالي

Monetary policy can be restrictive (tight), accommodative (loose) or neutral (somewhere in between). When the economy is growing too fast and inflation is moving significantly higher, the central bank may take steps to cool the economy by raising short-term interest rates, which constitutes restrictive or tight monetary policy. Conversely, when the economy is sluggish, the central bank will adopt an accommodative policy by lowering short-term interest rates to stimulate growth and get the economy back on track.

Any type of monetary policy, i.e. the anti-crisis and / or pro-development model of mild or sharp monetary policy pursued by central banking may be associated with the risk or success of generating positive, pro-development effects supporting economic development or making mistakes and generating financial losses in many entities economic and financial and economic crisis. I wrote more about this in the comments, questions and answers on my Research Gate profile. I conduct research in this area. The conclusions of the research I published in scientific publications that are available on the Research Gate portal.

Have a nice day. Regards.

Dariusz Prokopowicz

A lot has changed since I wrote the answer above. The SARS-CoV-2 (Covid-19) coronavirus pandemic appeared, which caused a decline in economic activity since March 2020 in many countries. Therefore, in order to stimulate economic processes, central banks reduced interest rates and other elements of a gentle, anti-crisis monetary policy. The applied loose monetary policy significantly contributed to reducing the negative effects of the economic crisis. Best wishes,

Dariusz Prokopowicz