This study employs Bayesian Vector Autoregression (BVAR) and Time-Varying Structural VAR (TVP-VAR) models for the Euro area, and the US to analyse the impacts of the shadow short rates (SSRs) on the Treasury-Euro Dollar rate (TED spread) and stock returns. Forecast error variance decompositions (FEVDs) of the BVAR indicated that the volatility in stock markets and the bubbles in financial assets can be mitigated by the SSR in the Euro area. However, the results of FEVDs showed that the credit risk cannot be explained substantially by monetary policy. According to our results, the contractionary monetary policy will decrease the stock returns; thus, it can be revealed that asset price bubbles and financial crisis risk can be controlled. It was also indicated that the contractionary monetary policy led to an increase in the TED spread, which in turn raised the probability of credit risk after the 2008 – 2009 global financial crisis (GFC).