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This paper reviews the empirical relationships between credit growth, economic recovery, and bank profitability in Europe after the global financial crisis (GFC). We find that the post-GFC recoveries in Europe have been weaker than previous recoveries, with the “double-dip” recessions in 2011–12 in many countries and the worldwide reach of the GFC explaining the underperformance. Bank lending has been subdued as well, but this appears to have only held back the recovery relatively moderately. A 10 percent increase in bank credit to the private sector is associated with a rise of 0.6–1 percent in real GDP and 2–2½ percent in real private investment. These relationships have not changed significantly during and after the GFC. Loan quality, customer deposits, bank equity price index, and bank capital appear to be closely linked to bank lending. As expected, bank profitability is positively and significantly influenced by credit growth, but this relationship has weakened after the GFC.

Bank loans. --- Bank credit --- Loans --- Banks and Banking --- Financial Risk Management --- Macroeconomics --- Money and Monetary Policy --- 'Panel Data Models --- Spatio-temporal Models' --- Single Equation Models: Single Variables: Instrumental Variables (IFV) Estimation --- Money Supply --- Credit --- Money Multipliers --- Financial Crises --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Measurement of Economic Growth --- Aggregate Productivity --- Cross-Country Output Convergence --- Economywide Country Studies: Europe --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Monetary economics --- Economic & financial crises & disasters --- Banking --- Financial crises --- Global financial crisis of 2008-2009 --- Money --- Credit booms --- Global Financial Crisis, 2008-2009 --- Banks and banking --- Iceland --- Panel Data Models --- Spatio-temporal Models