This is so because the transmission mechanism of monetary policy in contemporary, market-oriented economic systems is based on the assumptions that: 1.  credit markets exist and operate efficiently;  2.  the policy rate of the central bank is the primary determinant of interest rates in the market for credit;  3.  there exist stable, rational and predictable relationships between money and credit, on the one hand; and a host of macro-economic variables on the other; and  4.  the demand for and supply of credit are brought into equilibrium, in part, by “the” interest rate.
When credit markets cease to operate, or operate inefficiently, one of the channels through which conventional monetary policy operates ceases to be, or becomes increasingly less, effective.