On May 1, 2004, ten countries in Central, Eastern and Southern Europe will become full members of the EU. The parliaments and monetary authorities of the ten accession countries have already to a large extent adapted their legal and institutional structures to the new Europe-wide environment....

This paper describe how Capital Flows will influence the EU Accession Countries of Central and Eastern Europe. In particular it shows how carry trade flows are likely to exacerbate the difficulty of stabilization policy, how equilibria are critically contingent on risk premia, and, therefore,...