This paper explores the empirical relevance of arguments based on lack of credibility for explaining high ex post real interest rates afetr stabilization programs were implemented in Argentina, Israel, and Mexico in the mid-1980s.

We do not intent here to explore the choice of nominal anchors in the context of major inflation-stabilization programmes, as this topics has been covered, to a large extent, in proceding literature. Instead, we focus on cases of moderate inflation, such as Chile, Colombia, Israel and Mexico. In...