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    Public Choice Theory and the Transition Market Economy in Eastern Europe: Currency Convertibility and Exchange Rates

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    Author
    Macey, Jonathan
    Colombatto, Enrico
    
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    URI
    http://hdl.handle.net/20.500.13051/665
    Abstract
    In 1989, the people of Eastern Europe' revolted against their Communist governments with the hope of achieving political and economic self-determinism. These countries then faced the important challenge of transforming centrally-planned economies into market economies. This transition process has been a topic of much debate among economic theorists with little agreement as to which transition measures should be taken or when they should be executed. Public choice theory provides an analytical framework on which the nature and timing of the transition process can be better understood. The transition process in Eastern Europe is not a result of the uniform application of macroeconomic theory; rather, it is the result of competing interest groups acting rationally to further their self-interest. This Article discusses the theoretical application of public choice theory to the economic changes taking place in the Eastern European countries and demonstrates the accuracy of the public choice theory.
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