This paper analyzed the effects of the monetary policy and public debt on the relationship between the financial stress of the banking system and economic growth in the WAEMU countries from 1990 to 2016. From a panel smooth transition regression estimation, the results indicate that the relationship between the GDP growth and the degree of financial stress depends on the changes in the policy rate and the level of the debt-to-GDP ratio. We find that: (i) in a high financial stress regime, a restrictive monetary policy and a high debt-to-GDP ratio have a negative effect on economic growth - (ii) a monetary expansion and a low debt-to-GDP tend to mitigate the negative effects of high financial stress on the GDP - (iii) in a regime of low financial stress in the banking sector, economic growth reacts positively, regardless of the activism of the monetary policy strategies and the level of the ratio of public debt-to-GDP.
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