Threshold Effect in the Bank Lending Channel of Monetary Policy Transmission and the Role of Bank Portfolio Deterioration: A PSTR Specification in the WAEMU Zone

The objective of this paper is to analyse the influence monetary policy on credit supply in WAEMU zone over period 1996-2017. study focuses countries, except for Guinea-Bissau, due unavailability sufficient data. We apply Panel Smooth Transition Regression (PSTR) model Gonzalez et al. (2005). results reveal non-linearity link between and supply. There a threshold risk exposure 8.726% above which loses its effectiveness. Indeed, has positive effect when value gross bank portfolio deterioration rate less than or equal an insignificant threshold. Above threshold, distended. In case, it level economic activity that stimulates area. These indicate effectiveness conducted by Central Bank West African States (BCEAO), through channel, should take into account attained banks. Thus, recommends authorities further strengthen prudential supervision within WAEMU.