Exchange-rate policy in eastern Europe and EU integration

Abstract

The paper examines potential conflicts between rapid EU integration of economies in transition (EiTs) and their pursuing catch-up by focusing on exchange-rate policies. After justifying the proposed inquiry, official pronouncements on ER policies that EU candidates are expected to pursue in the run-up to and upon their accession are summarized, and the salient features of recent debates on ER regimes recalled. Inasmuch as EiTs must modernize and reconcile this obligation with EU membership, in spite of the EU's cohesion experience, the paper combines real and nominal convergence issues with institutional changes upon EU accession to draw a novel perspective on the desirable postaccession transition regime for EiTs with a fairly active ER policy and the EU's cohesion strategy. Core components of such a strategy are advocated. JEL Codes: F31, P33, F33

Keywords

• Exchange Rates