An effective monetary policy requires a stable relationship between the money stock and macroeconomic variables such as output, price level, interest rates, and exchange rates. A dynamism of structural changes in transition economies of eastern Europe makes such stability far from obvious. This is reflected in the fact that a stable demand for money function cannot be estimated even for the most advanced East European countries: Poland, Hungary, and the Czech Republic. Empirical analysis of the relationship between nominal variables indicates rather limited relationships as well. Therefore, all that can be expected from monetary policy in eastern Europe is not to be too tight so as to starve the economy of needed liquidity and not to be too loose so as to ignite inflation.