The article explores how using the euro alongside local currencies affects money demand in Central and Eastern European countries. It introduces a model that distinguishes between currency substitution and money demand sensitivity to exchange rate changes. The model suggests that money demand is influenced by interest rate differences between local currencies and the euro. It also shows how exchange rates impact money demand without currency substitution. The study uses empirical tests to analyze long-term money demand, linking it to the cost of holding money and either household spending or economic output in these countries.