Supply and Demand in the European Credit Market During the Recent Crisis

The recent financial crisis has been followed in Europe by a significant decrease in credit flows to non-financial enterprises. This paper investigates demand and supply of loans using data from surveys and company balance sheets. Our econometric analysis suggests that recent ECB policy has favoured the credit market. Although bank credit standards are tighter than usual, the present low credit growth is more the consequence of a weak demand for loans than a reduced supply from the banking system