However these results need to be interpreted with

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0:066%. However, these results need to be interpreted with some caution. First, the power of the test is limited since in the euro area sufficiently long time series on credit standards are not available (we use data from 2003 Q2 till 2008 Q1). Second, data on credit standards are only recently undergoing a full cycle, which may bias the coefficients of our estimates. DISCUSSION:
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What could be the reasons for the finding of a significantly positive impact of changes in the supply of credit (both in terms of volumes and in terms of lending standards) on real economic activity in the euro area while such effects are not apparent in a US context (at least according to Driscoll, 2004)? Possible explanations most likely derive from Cross-Atlantic differences in the banking and financial structures affecting the preconditions underlying the existence of a bank lending channel (i.e. the non-substitutability of bank deposits and the existence of bank dependent firms and households). As regards the uniqueness and importance of customer deposits in bank funding structures between the euro area and the US, it might be noted that in terms of on-balance sheet items the share of customer deposits is on aggregate not markedly different between commercial banks in the two economic areas. However, this may abstract from the fact that in the US a large part of financial intermediation is not registered on the balance sheets of commercial banks. This is, for example, illustrated by the major role played by the Government-Sponsored Agencies in the mortgage- financing in the US. Furthermore, o¤-balance sheet funding by US banks is generally more widespread than in the euro area. One example is the fact that securitization is considerably more advanced in the US compared to the euro area. For instance, by end-2007 the annualized sum of securitization transactions in the euro area amounted to only around 3% of GDP compared to 12% of GDP in the US.18 In addition, given the sheer size and depth of US capital markets banks may typically find it easier to substitute deposits with market-based funding sources (such as commercial papers, certificates of deposits, bonds and equity). As an illustration, by end-2007 the com- binned amount of quoted equity and debt securities issued in the US amounted to 312% of GDP compared to only 166% of GDP in the euro area.19 Despite these differences Driscoll (2004) does find evidence that US banks cannot perfectly substitute deposits. In other words, the first precondition of a bank lending channel appears to be fulfilled both in the US and in the euro area. Therefore, the difference between our results for the euro area and the US-based studies (e.g. Driscoll, 2004; Ashcraft, 2006) probably stems primarily from the greater dependence on bank credit of the euro area private sector. Indeed, by end-2007 bank loans to the private sector constituted 145% of GDP in the euro area. This compares with a corresponding ratio of 63% in the US.20 Furthermore, bank dependent firms should normally be found among the small and medium-sized enterprises (SME) which are not able to raise funds in the capital markets. Moreover, it may be noted that
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