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The Park Place Economist

Abstract

Although the 25thanniversary of the fall of the Berlin Wall and the beginning of the reunification of post-war Europe was celebrated on November 9 this past fall, study of Europe continues to be divided into two camps: East and West. In these past twenty-five years, former Soviet satellites have rebuilt their economies following the regime change from communism to capitalism. Poland, for example, was the only country in Europe to show contin-uous positive growth throughout the global financial crisis of 2008 and 2009 (EC, 2014). Meanwhile, the European Union (EU) has continued to expand, further integrating economies in both Eastern and Western Europe. In order to gain membership into the Union, a state must demonstrate commitment to the EU goal of economic integration, which is defined as a six-step process in which economic and monetary union is merely a step. A decade ago, in 2004, ten additional European countries were granted accession into the EU after meeting the convergence demands for membership. These ten Central, Eastern, and Mediterranean countries are Malta, Cyprus, Estonia, Latvia, Lithuania, Poland, the Czech Republic, Slovakia, Slovenia, and Hungary (EC, 2014). The growth of the European Union represents a shared commitment among its member states – even those in Eastern Europe – to achieve higher degrees of economic integration. The physical boundary between Eastern and Western Europe has now been long demolished and the EU’s emphasis on open trade and economic integration has resulted in the shrinking of economic barriers, but the division between Eastern and Western Europe is still important to the discussion of contemporary European issues. As an emerging Eastern economy which demonstrated stability through the Great Recession, Poland will serve as the focal point of this study, which aims to determine if immediate interest rates in Poland are better explained by those in Eastern or Western European economies. It is an interesting country to study as it is potentially bridging a previously perceived gap between Eastern and Western Europe.

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