Transforming trade and payments in transition economies - the regional dimension

The paper examines the desirability, on economic fundamentals, for the tran sition economies (TEs) to replace their inherited integration format with a nother regional compact while awaiting merger into the European Union (EU). Many reasons were invoked to negate this. On economic fundamentals too muc h faith was placed in the predictability and theoretical strength of the gr avity model for predicting normal bilateral trade flows and in the seamless merger of TEs in global trade and financial networks to offset any initial transformational imbalances. Opportunities for regional cooperation have n ot been seized largely for political and security rather than sound economi c reasons, This is a suboptimal policy choice not only in governing the tra nsition but also in governing the processes for eventually playing a constr uctive role in the EU's single market. (C) 2001 Society for Policy Modeling . Published by Elsevier Science Inc.