Are bank loans important for output growth?

► This paper analyzes the impact of loan supply on personal income growth in the euro area. ► Supplied bank loans are found to be a significant determinant of output growth in the euro area. ► The results therefore support the credit view in the euro area, in contrast to the US. ► A second result is that bank lending reacts to money demand shocks. ► Bank regulations may be a source of shocks as important as changes of the key interest rates.