Foreign Trade Policy and Exchange Rate Regimes in Eastern European Transition and the Effect on EU Accession

Abstract

The European Union is expanding to include Central and East European countries, eight of which were inducted last May. Before receiving membership in the organization, these transition countries must first demonstrate a functioning free market economy. This paper investigates the effect of foreign trade policies and exchange rate regimes on transition, specifically on output growth and macroeconomic stabilization. Examples are taken from two new EU member countries: Poland and the Czech Republic; as well as two candidate countries: Romania and Turkey, to illustrate these effects. By looking to these countries, it is possible to reason which policies and procedures are most effective for gaining EU accession, and what measures should be considered by candidate countries.