Exchange Rate Policy in Transition Economies: The Initial Choice and the Subsequent Experience

This paper examines the experience of most Central and Southeastern European countries with respect to the exchange rate regimes they adopted. It first analyzes the exchange rate arrangements of these countries at the beginning of the transition process and how they relate to their initial macroeconomic conditions. Then, the subsequent experience of these countries is considered and linked to the course of their economic stabilization and reform efforts. It is pointed out that, depending primarily on their economic conditions, they initially adopted one of the two polar exchange rate systems. After considering their subsequent experience, the analysis concludes that a move away from the two polar regimes was to a large extent possible only in the case of countries that were more or less successful in implementing stabilization and reform programs.