For example a restrictive monetary policy may not directly lead to a reduction of financing facilities for companies, but might rather influence the expectations of the future direction of real activity in the economy. This, in turn, might worsen the prospects for the company’s future earnings and therefore reduce the returns of going public or bond issues.
As there is empirical evidence that protracted low interest rates may have fostered financial market participants’ grog risk appetite and contributed to the dynamic growth of credit aggregates worldwide via this risk-taking channel in the monetary policy transmission, the events of the past 12 months also throw up some serious questions on the role of monetary policy.