20 satisfy the FCLR. In contrast, the March 2007 extreme outlier cannot be related in a meaningful way to any important event.

**Table 2. Prudential measures and bank recapitalization, 2001-2010**

|N=121, 2000/12-2010/12||||**Y**=DLO|G(Bank_|capital)||||
|---|---|---|---|---|---|---|---|---|---|
|**X**<br>(HAC std. errors)|coeff.|s.e.|p-value|coeff.|s.e.|p-value|coeff.|s.e.|p-value|
|Constant|0,0024|0,0020|0,2230|0,0016|0,0017|0,3494|0,0016|0,0013|0,2289|
|Y(t-1)|-0,0190|0,0728|0,7946|0,0524|0,0492|0,2892|0,0542|0,0487|0,2682|
|Y(t-12)|0,2287|0,1238|0,0673|0,3293|0,0837|0,0001|0,3308|0,0821|0,0001|
|MRR rate %|0,0001|0,0001|0,2168|0,0001|0,0001|0,3561|0,0002|0,0000|0,0009|
|MRR effective|0,0050|0,0043|0,2515|0,0036|0,0039|0,3528||||
|gen. bank res. req. in place|-0,0029|0,0028|0,2946|-0,0007|0,0022|0,7617||||
|FCICR weights in place|0,0045|0,0024|0,0599|0,0039|0,0024|0,1072|0,0038|0,0023|0,0962|
|stricter gen. bank res. req. in place|-0,0016|0,0055|0,7682|-0,0067|0,0041|0,1066|-0,0074|0,0034|0,0294|
|Outlier, 2006/11||||0,0448|0,0021|0,0000|0,0449|0,0020|0,0000|
|Outlier, 2007/03||||0,0795|0,0025|0,0000|0,0796|0,0025|0,0000|
|Mean Y|0,0090|||0,0090|||0,0090|||
|SD(Y)|0,0141|||0,0141|||0,0141|||
|Adj. R square|0,1987|||0,5266|||0,5340|||
|AIC|-5,8486|||-6,3596|||-6,3906|||
|BIC|-5,6637|||-6,1286|||-6,2058|||
|HQC|-5,7735|||-6,2658|||-6,3155|||
|DW|1,9579|||1,9896|||1,9853|||

Overall, the second equation in Table 2 indicates that there may be no single measure that alone stimulated bank recapitalizations in the 2004–2008 period. However, this result may be driven by the interaction of different measures due to overlapping periods of their implementation and/or the construction of the two MRR variables and the two general banking reserves variables, which may represent highly correlated pairs. Therefore, in the final step, the dummy indicator for the existence of MRR (found insignificant by Galac (2010)) and the dummy indicator for the existence of general bank reserves (highly insignificant in the second equation) are excluded from the second equation. The resulting third equation in Table 2 describes the data at hand just as well as the second equation, but unlike the latter, it provides strong statistical evidence about the positive relationship between the MRR rate and bank capital additions (in line with Galac (2010)), as well as an indication of a modest positive impact of FCICR risk weight add-ons.

Galac (2010) also attempts to quantify the impact of all central bank measures together on the building of bank capital buffers in the period leading up to the crisis through simulations. This analysis concludes that under several realistic counterfactual scenarios in which no new monetary and prudential measures drive capital-raising efforts in the 2004–2008 period, banks would have had an aggregate shortfall of capital of between HRK 11 billion and 13 billion (just under EUR 2 billion) at the height of the crisis, against the actually observed shortfall of around HRK 6 billion, with the difference of HRK 5 billion to7 billion representing about 1.5 percent to 2 percent of end-2008 banking sector assets. This analysis also finds that under an extreme scenario in which the central bank would not have relaxed its prudential measures during the crisis, this difference could have been as high as HRK 22 billion. In either case, it appears