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Purchasing Power Parity (PPP) represents one of the earliest theories of exchange rate determination. Recent literature on the question of whether PPP holds in transition economies yields mixed results. The purpose of this book is to revisit the theory of PPP under the conditions of transition process. Four transition economies were tested: the Czech Republic, Hungary, Poland and Slovakia. The book can be divided into two parts. First more theoretical part summarizes the theory on PPP. Second more practical part describes transformation history of four transition countries, discusses the future role of exchange rate under process of convergence towards the European Union, gives literature review of papers testing PPP in transition economies, outlines the econometric approach adopted and discusses the empirical results. After studying this book readers should understand better the role the exchange rate plays in transition process but also the role it plays in the process of convergence towards European Union where the concept of the PPP might be helpful as a long-run benchmark.