This study examines how balance-sheet stress and crisis conditions jointly shape credit constraints and monetary policy transmission. Using original firm- and household-level survey data, the analysis demonstrates that credit constraints are more prevalent during crises, and that balance-sheet stress significantly increases the likelihood of borrowing constraints, with these effects being amplified under systemic stress. The combined evidence from regression estimates, predicted probabilities, and marginal effects indicates that even accommodative monetary policies may fail to stimulate credit and real economic activity when borrowers face binding balance sheets. These findings underscore the limits of interest rate-based policy tools in crisis environments and emphasize the importance of complementary interventions aimed at restoring credit access and repairing borrower balance sheets, particularly during periods of widespread financial distress.
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