Monetary policy is not very effective when there are sectoral shifts

The COVID crisis is generating a significant shift in the sectoral structure of the economy between sectors permanently affected by the crisis and growing sectors. The sectors affected by the crisis are suffering from significant financial contraction: their earnings are becoming insufficient and their debt is becoming excessive; they cannot find financial resources to invest. This makes monetary policy ineffective: a fall in interest rates is not enough to kick-start investment and employment in these sectors since it is not enough to ease financial constraints: these sectors lack earnings and cannot run up more debt. Since government transfer payments can be targeted at business sectors or economic agents in difficulty, fiscal policy has therefore become more effective than monetary policy.