Monetary policy, threshold of profitability and dynamics of private investment in the West African Economic and Monetary Union

Koffi Sodokin (), Yao Kouwonou, Mawuli Kodjovi Couchoro and Akilou Amadou

Journal of International Money and Finance, 2024, vol. 143, issue C

Abstract: This study investigates the interactions between optimal monetary policy, investment profitability thresholds, and private sector investment dynamics within the West African Economic and Monetary Union. Analyzing data from 2000 to 2021, it employs advanced econometric models (linear, asymmetric, and threshold effect dynamic panel error correction models) to provide a nuanced understanding of the investment environment in the union. The findings reveal the confluence of low returns and high borrowing costs for private investment. Notably, this study suggests that simply pursuing an expansionary monetary policy does not offer a sufficient solution. Instead, it proposes a more accommodative stance by the Central Bank, featuring lower policy rates, to alleviate the negative impact of high credit costs on private investment and ultimately stimulate economic activity.

Keywords: Monetary Policy; Internal rate of return; Investment; West Africa (search for similar items in EconPapers)
JEL-codes: E22 E52 O55 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:143:y:2024:i:c:s0261560624000676

DOI: 10.1016/j.jimonfin.2024.103080

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