Monetary and Exchange Rate Policy of Transition Economies of Central and Eastern Europe after the Launch of EMU

The more advanced Central and Eastern European Countries (CEECs) face an evolving set of considerations in choosing their exchange rate policies. On the one hand, capital mobility is increasing, and this imposes additional constraints on fixed exchange rate regimes, while trend real appreciation makes the combination of low inflation and exchange rate stability problematic. On the other hand, the objectives of EU and eventual EMU membership make attractive a peg to the euro at some stage in the transition. The paper discusses these conflicting considerations, and considers the feasibility of an alternative monetary framework, inflation targeting.Transition economies;Central and Eastern Europe;inflation, monetary policy, monetary fund, inflation targeting, central bank, low inflation, monetary system, monetary union, monetary policies, international monetary system, relative price, price level, monetary aggregate, inflation targeting framework, relative prices, independent monetary policy, real exchange rates, monetary policy instruments, real interest rates, optimal monetary policy, european monetary union, inflation rates, monetary policy strategies, inflation target, national bank, inflation data, monetary growth, average inflation, moderate inflation, inflation process, monetary stability, forecasting inflation, monetary framework, foreign exchange, actual inflation, terms of trade shocks, european monetary system, macroeconomic performance, monetary policy framework, monetary authorities, inflationary pressures, percent inflation, terms of trade, inflation rate