Essays on the real effects of exchange rate based stabilizations

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Exchange rate crises in Latin America recently put a spotlight on the perils of Exchange Rate-Based Stabilizations (ERBS), which use the nominal exchange rate as the main policy target for stabilizing inflation. This dissertation documents the effects of ERBS in high inflation economies and develops models to explain these stylized facts. The first chapter assesses the empirical regularities associated with ERBS. Based on a sample of 13 stabilization episodes, typical real and monetary dynamics are investigated in Burns-Mitchell diagrams. Stylized facts of ERBS are the initial increases in consumption and GDP, the real appreciation and the current account deterioration. Moreover, consumption and output are found to follow a boom-slowdown cycle, where slowdown means reduced or zero growth if the ERBS is still in effect, and negative growth rates for failed