The Choice of the Appropriate Exchange Rate Policy For the Post-Socialist European Countries: A Theoretical Approach

Abstract

Most of the former socialist countries have already made already a seri- ous progress in transforming their economies to the free market system. As op- posed to the old E.U. members, who have had the necessary time to adjust their economies to the needs of the monetary union, the post-socialist countries are forced to follow the strict path of the Maastricht criteria. To that end, exchange rate policy plays a very central and important role since, on the one hand, these countries are allowed to participate in the globalized economy throughout a credible exchange rate regime and, on the other hand, able to tackle the many problems which arise from the international financial instability. In this article, we argue that conclusions about the appropriate exchange rate policy of these countries can be made only in the realm of the theories of financial integration.