In the academic literature some criteria have been identified which could have an impact on the
success of the transition process, such as macroeconomic stability, microeconomic restructuring and
implementation of legal and institutional reforms. The role of the exchange rate system in general is to
foster the stability of the monetary environment characterized by low inflation rates and a stable
domestic currency. Although the importance of a sustainable price-level oriented monetary policy for
the transition-success has been stressed in the academic literature, there are still further questions to be
answered related to the choice of the exchange rate system throughout the different phases of the
transition process. This paper intends to contribute to close this gap in the literature. The guiding
research question is how the choice of an exchange rate system influences the economic success of a
country in transition and its gradual integration within the European Union (EU) and the European
Monetary Union (EMU). For this purpose, the study focuses on the transition process of South-eastern
Europe (SEE). In particular and for the first time in a joint study, we will take a look at the following
South-eastern European Countries (SEECs), often referred to as the “West Balkans”: Bosnia and
Herzegovina (BiH), Croatia, Former Yugoslav Republic of Macedonia (FYRM), Serbia and
Montenegro, as these five countries share certain common characteristics: they were part of the
Former Yugoslav Republic (FYR); they are countries in transition; they are members of the Stability
Pact for South-eastern Europe and they are all potential EU-accession candidates.