Macroprudential regulation of credit booms and busts : The case of Croatia

Croatia employed macroprudential measures to manage credit growth and capital in#ows 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 amongmeasures, the econometric results in this paper suggest that the measures were most e$ective in requiring banks to hold high liquidity and capital bu$ers, and less e$ective in slowing credit growth and capital in#ows. Larger bu$ers seem to have helped Croatian banks weather the %nancial crisis, making the adjustments to capital and liquidity during the crisis smaller.