Description:
Croatia employed macroprudential
measures to manage credit growth and capital inflows during
the boom years of the 2000s, including reserve requirements
on loan growth, a marginal reserve requirement on increases
in foreign liabilities, foreign exchange liquidity minima,
and elevated capital adequacy ratios. Although quantitative
analysis is complicated by substantial overlaps among
measures, the econometric results in this paper suggest that
the measures were most effective in requiring banks to hold
high liquidity and capital buffers, and less effective in
slowing credit growth and capital inflows. Larger buffers
seem to have helped Croatian banks weather the financial
crisis, making the adjustments to capital and liquidity
during the crisis smaller.