The 2008 global financial crisis and the on-going European sovereign debt crisis have led to financial instability and economic slowdown in most European Union (EU) countries. The crisis has increased the pressures to reconsider the goals of and linkages between monetary and financial stability policies as well as the regulatory and supervisory institutional framework in many European countries. This raises the following questions: How has the balance between the monetary policy mandate of Central Banks and their responsibility for financial stability changed over time? And what factors have influenced the main regulatory decisions? Drawing on a comparative political economy approach, this paper investigates the impact of domestic political institutions on the calibration of monetary policy and financial stability policy in two new EU member states from Central Europe: Czech Republic and Slovakia.
