One of the most important targets for new European Union (EU) Member countries is accession to European Monetary Union (EMU). Achieve this goal, countries must become member of EU, then fulfil precondition of this accession, which takes long and difficult process. In this process, countries must compliance their economy with Euro area.

Euro Area experiencing, large capital inflows, high trading volume, huge amounts of portfolio and direct foreign investments, adoption of EU institution. At the same time, countries with rapid increases in capital investment and high productivity growth rates are converging to developed countries. Countries also trying to adapt the budget balance, public debt and long-term interest rates to EU area. Moreover, to join the European Exchange Rate Mechanism-II (ERM-II) countries must keep their excahange rate movements between a ±15 percent line around a central equality, accession countries are also assume to accomplish the Maastricht Convergence Criterion. In this respect, annual inflation rate of EMU must not exceed more than 1,5 percent the above the best three “member states” in EU. (Natalucci F.M. and Revanna F., 2002)

Taking formal candidate status in 1999 and 2005 screening and negotiation process has started with Turkey. In this context, Turkey economical integration and convergence with European Union countries is remarkable. On the road to European Union integration process, Turkey likely to face similar problems and experiment which new European countries has experienced. Therefore, experience of new European Union countries constitutes an important lesson for Turkey and these experiences must be understood correctly.


Vast number of previous studies have examined that exchange rate regimes, especially focus on fix (fix, optimum currency area) and fluctuated exchange rate regimes.

After downfall of the Soviet Union, taking shape of a common currency in Europe, and a dash of exchange currency crises internationally three economic set of the 1990's countries all over the world have been moved to consider their exchange rate regimes. There is extended settlement that in a world of capital mobility the old post war formula of adjustably fix exchange rates is a recipe for crisis. However, what alternatives countries should adopt their currency system which more suitable and less risky. In this respect, many countries have moved (temporarily or permanently) towards more 'flexible exchange rates', others have moved toward more really ‘fixed exchange rates' in a large variety of different forms.Questions of “which exchange rate regimes could be more appropriate and efficient for countries and regions. The argument seemed to be achieve after late1945, when most free economy market countries agree on to the 'Bretton Woods' regime of fixed exchange rates. By 1973 the Bretton Woods regime had collapsed. Fallowing that 1979, the majority of European countries had adopted fixed rate regimes and in 1999, European economists came up with an idea , adopted a common currency in Europe. Beginning of early 90's countries chooses different exchange rate regimes. Some countries in EU such as Ukraine, Romania and Bulgaria, choose floating rates. Some others, such as Czech Republic, Hungary and Poland choose to fix rate. The fix rate regimes performance better than the floating regimes, they managed better in both, reducing inflation and the output costs. (Dean J. W. 2003,p.1-11).

Frommel and Schobert (2006) , were reviewed formal and actual exchange rate regimes in the Czech Republic, Poland, Hungary, Slovakia, Slovenia and Romania for the 1994-2004 period. Study proof that in this period Slovenia has biggest different between formal and actual exchange rate regimes application. Until 1997 Slovenia officially managed by crawling band regimes, after 1997 the crawling peg has adopted. When countries experience analyse a significant point attract attention. Based on this, five countries out of seven which access to ERM-II were adopted fix exchange rate regimes. Therefore, It raises the question in mind:”fix exchange rate regimes has more advantage to accession to ERM-II and Maastricht criteria”. (Frommel and Schobert 2006,p.467-470)

EU Accession and the Balassa Samuelson Effect and inflation:

High capital inflows and sustained real exchange rate appreciation in EU accession countries can be explain by Balassa Samuelson effect. The Balassa Samuelson effect is discuss carefully about all the facts a substantial hurdle for compliance with the nominal convergence criteria. Many empirical analysis the theoretical background can be access in Nenovsky and Dimitrova(2002) De Gregorio and J. Giovannini et al. (1994), Cipriani (2001), Egert (2002), Fischer (2002), Rogers (2002) Arratibel and Rodriguez-Palenzuela et al.(2002).Additionally, In some papers discuss both real and nominal policy between EU countries and the Euro currency area. Buiter and Grafe (2002) offer an extensive survey. Pelkmans and gross.j, et al. (2000) provide an extended detailed analysis of the long term developing of the Eastern European enlargement. (Natalucci F.M. and Revanna F., 2002)


In first chapter, theory and empirical literature studies will be presented. Advantage and disadvantage of alternative exchange rate regimes (fix and fluctuated) will be analysed .In section two, strategy of new EU member countries exchange rate regimes and road of the Euro accession process will be analysed in historical process. After that, role of the exchange rate regimes in adopting Euro will be review. In section tree, country experience of Euro accession will be research and give graphic and examples. In last section Turkey case and conclusion will be given.

Data Collection

Main source of my data will be Eurostat, Europa, face to face interviewing Economics-e-journal (www.economics-ejournal.org), the International Financial Statistics (IFS) Database of the IMF, World bank , the Federal Reserve Bank of St. Louis, Bulgaria National Bank, Croatian National Bank, Czech National Bank, the Central Bank of Hungary, the Central Statistical office of Poland, Bank Of Estonia, the Bank of Slovenia, the National Bank Of Lithuania, Bank Of Latvia, the Central Bank Of Malta, the National Bank Of Slovakia. National Bank of Poland, the National Bank of Romania, the Central Bank of the Republic of Turkey, Turkish Ministry of Finance.

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