Optimal policy-mix and private investment in a monetary union

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This study investigates the interactive threshold effects of tax and monetary policies on private investment in the West African Economic and Monetary Union using a threshold-effect dynamic panel error correction model on data over the period 2000-2021. The results reveal non-linear effects of policy-mix on private investment, with optimal thresholds identified beyond which positive effects can reverse. Moreover, the impact of investment profitability varies according to policy-mix thresholds, emphasizing the importance of precise calibration of fiscal and monetary policies. This calibration should consider threshold effects and the broader macroeconomic context, including investment profitability, to optimize private investment.

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