ABSTRACT
This chapter discusses the characteristics of the countries in the Commonwealth of Independent States in terms of the criteria delineated by the optimal currency areas approach. The initial level of commodity market integration may have been high enough to argue that the Commonwealth countries would benefit from a fixed exchange rate arrangement. If trade in the Commonwealth of Independent States approaches the predictions, the case for fixed exchange rates will lessen. Most of the Commonwealth states' trade has been conducted with Russia, so the Russian ruble would be the best candidate for pegging to, if not for its instability. The presence of new borders can only decrease the degree of labor mobility within the Commonwealth. The countries within the Commonwealth of Independent States choose divergent monetary policies, speeds of adjustment and reform paths. Countries interested in a fast pace of reforms will peg to Western currencies to demonstrate a commitment to price stability.
