19 negative result may be entirely due to its inability to affect corporate borrowing, while there is strong evidence that household borrowing indeed slowed when CGR was active. This is broadly in line with what one could expect in the period analyzed, given the restrictions on natural persons banking abroad and a lack of such restrictions for legal persons after 2002. It also suggests that the CGR could have contributed to slowing down the household lending boom and perhaps even the current account deficit, which are certainly both aims of central bank policy. Finally, the unexpectedly positive and significant initial effect when the CGR is implemented or tightened, in all three specifications, can probably be explained by inertia, that is, prior loan commitments by banks that had to be honored even as the CGR began to bite.

**Table 1. Credit growth and credit growth limits, 2000–2010**

|N=120, 2001/01-2010/12|**Y**=DL|OG(Total|_debt)|**Y**=DL|OG(NFC|_debt)|**Y**=D|LOG(HH_|debt)|
|---|---|---|---|---|---|---|---|---|---|
|**X**<br>(HAC std. errors)|coeff.|s.e.|p-value|coeff.|s.e.|p-value|coeff.|s.e.|p-value|
|Constant|0,0166|0,0023|0,0000|0,0134|0,0024|0,0000|0,0145|0,0020|0,0000|
|Y(t-1)|-0,1603|0,0859|0,0645|-0,0863|0,0917|0,3485|0,0459|0,1078|0,6713|
|Y(t-12)|0,1685|0,0919|0,0694|0,2382|0,1115|0,0348|0,2600|0,0908|0,0050|
|CGR effective (t)|-0,0011|0,0016|0,4923|-0,0006|0,0024|0,8122|-0,0043|0,0019|0,0286|
|CGR increased (t)|0,0062|0,0014|0,0000|0,0040|0,0023|0,0860|0,0112|0,0030|0,0004|
|EMBI Spread, Croatia (t-1)|0,0000|0,0000|0,0001|0,0000|0,0000|0,0009|0,0000|0,0000|0,0001|
|Outlier/2001-08|0,0404|0,0017|0,0000|0,0383|0,0027|0,0000|0,0504|0,0016|0,0000|
|Outlier/2002-07|0,0242|0,0017|0,0000||||0,0357|0,0018|0,0000|
|Outlier/2002-10|0,0208|0,0010|0,0000||||0,0329|0,0016|0,0000|
|Outlier/2008-01|0,0234|0,0014|0,0000|0,0374|0,0022|0,0000||||
|Mean Y|0,0120|||0,0110<br>|||0,0142|||
|SD(Y)|0,0103|||0,0116|||0,0130|||
|Adj. R square|0,3842|||0,2499|||0,4509|||
|AIC|-6,7250|||-6,2957|||-6,3744|||
|BIC|-6,4927|||-6,1099|||-6,1653|||
|HQC|-6,6306|||-6,2202|||-6,2895|||
|DW|2,0955|||2,1210|||2,1027|||

Regarding capital inflows into the banking sector, Galac (2010) finds strong statistical evidence that the rate of the marginal reserve requirement (MRR) is positively associated with bank capital formation, in addition to some faint evidence that the existence of the MRR is negatively associated with banks’ foreign borrowing. Here, we first examine whether the statistical evidence on bank capital formation is robust to the introduction of the prudential measures described in sections 3.5 and 3.6 into the analysis. To this end, three equations for monthly additions to the aggregate bank capital are presented in Table 2.

The first equation, which is similar to the one estimated in Galac (2010), shows that the results reflecting the effectiveness of the MRR at stimulating bank recapitalization are sensitive to the presence of other prudential measures in the model. However, the model implicit in the first equation may not be adequate because of the presence of extreme outliers for two months during the period analyzed. These were explicitly taken into account in the second equation, which significantly strengthened the results indicated by the model and suggested that the November 2006 outlier could possibly be connected to the introduction of foreign currencylinked liabilities into the FCLR base in the previous month. Since the MRR rate was already at its maximum at that time, it is possible that the cheapest way for banks to adjust to this change of the measure was to raise capital and then invest it in additional liquid foreign currency assets to