This section reviews the experience with exchange arrangements of five Eastern European countries—Bulgaria, Czechoslovakia, Hungary, Poland, and Romania—that initiated extensive market-oriented reforms in 1990–91.26 Discussion of proposals for a multilateral payments system among Eastern European countries to replace the former CMEA created a consensus against such a mechanism, mainly because existing trade was small (except with the former U.S.S.R.) and because such an arrangement would discriminate against trade with market economies.27 Instead, all five countries have by now established a fairly generalized current account convertibility, either in a “big bang” fashion or in a gradual but still quite speedy way, and have continued to liberalize remaining restrictions. However, the degree of flexibility of the exchange rate systems has varied across countries and over time, ranging from pegged exchange rates to fairly cleanly floating exchange rates. While trade liberalization has generally supported the achievement of balance of payments objectives and the expansion of trade with market economies, trade between Eastern European members of the former CMEA and the former U.S.S.R. collapsed in 1991. Among the reasons for this collapse were difficulties in carrying out trade under hard currency settlements.
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