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.

During the 1970s and early 1980s, Spain suffered high rates of inflation but inflation declined and by 1997 inflation had fallen to approximately 2 percent. To fight inflation, Spain implemented austere monetary programs, joined the EMS in 1989, enacted central bank autonomy in 1994, and...