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This thesis comprehensively examines financial structure choices of firms in three emerging economies of the East African region. It highlights the lack of research in this area and empirically examines three panel data models of financial structure (ownership, firm-specific factorsâ and firm performance models, whilst incorporating the influence of macroeconomic factors) using panel data estimation techniques, including the method of moments framework. It estimates these models using panel data from 47 listed firms; and then data from 20 private firms. The original and significant contributions to knowledge of my thesis are as follows: it provides novel insights into the relation between ownership structure and firm financial structure; it provides new understanding of the relation between firm-specific factors and financial structure of quoted and private firms in emerging economies (an area where research has been lacking); it provides new understanding and additional evidence with respect to the effect of ownership structure on the performance of firms in the East African region; it incorporates the influence of macroeconomic and institutional factors on financial structure choices; and it proposes frameworks for reviewing knowledge of financial structure choices, which can be used for further scholarly work on financial structure of firms in emerging economies. The findings of this research have implications for a possibility of a new theoretical framework for researching financial structure choice of firms in emerging economies; for policy makers to design deliberate policies that enhance access to finance for firms operating in an emerging economy; and for policy makers to regulate institutions (banking sector and capital market) as they develop to ensure equitable access (particularly for the private firms) to finance by all firms operating within the economy. Taken together, the results have implication for future scholarship in that they provide clearer and useful insights on ownership structure, financial structure choices and performance of both quoted and private firms in emerging economies; and the methods used are highly replicable and can be replicated in future studies of financial structure choices of firms in emerging economies. It has also invoked further questions that require answers.

Submitted by Yong Ju Shim (morangoum@naver.com) on 2017-02-01T11:40:02Z No. of bitstreams: 1 20170201 REALLY final version for printing.pdf: 1088076 bytes, checksum: 43c4c0b955201c5a1073290a22ce2dfb (MD5) / Approved for entry into archive by Pamela Beltran Tonsa (pamela.tonsa@fgv.br) on 2017-02-01T11:53:50Z (GMT) No. of bitstreams: 1 20170201 REALLY final version for printing.pdf: 1088076 bytes, checksum: 43c4c0b955201c5a1073290a22ce2dfb (MD5) / Made available in DSpace on 2017-02-01T12:03:13Z (GMT). No. of bitstreams: 1 20170201 REALLY final version for printing.pdf: 1088076 bytes, checksum: 43c4c0b955201c5a1073290a22ce2dfb (MD5) Previous issue date: 2016-11-30 / Este artigo fornece uma nova perspectiva sobre como as empresas de manufaturas de economias emergentes (EEFs) conseguem alcançar desempenho superior nas exportações. Diferente das empresas de economias desenvolvidas que não tem problemas com dotação, as EEFs só chegam aos mercados externos adicionando recursos externos (apoio governamental através de subsídios), os seus recursos internos (capacidade de P&D) são para influenciar seu ambiente interno (produção de patentes internacionais e desenvolvimento de estratégias de exportação). Investigo 140 empresas de quatro países (Brasil, Rússia, Índia e China), entre os anos de 2008 e 2012, com dados obtidos por meio de um questionário online. Estabeleço relações entre as variáveis para orientar o desenvolvimento empírico com modelagem de equações estruturais. / This paper provides a new perspective on how manufacturing emerging economy firms (EEFs) achieve superior export performance. Unlike manufacturing developed economy firms that lack endowment problems, manufacturing EEFs only reach external markets by adding external resources (government support via subsidies) to their internal resources (R&D capabilities) to influence their internal environment (international patent production and export strategy development). I investigate 140 firms from four countries (Brazil, Russia, India and China) between 2008 and 2012 with data from an online survey. I establish relationships between the variables to guide the empirical development with structural equation modeling.

Submitted by LINO MEJIA (estebanllamosam@gmail.com) on 2017-06-22T20:39:35Z No. of bitstreams: 1 MasterThesis_Lino_Mejia_FGV_Ficha.pdf: 4647982 bytes, checksum: 29d2e5446d8872f2ad94a5fac6a16c72 (MD5) / Approved for entry into archive by Maria Tereza Fernandes Conselmo (maria.conselmo@fgv.br) on 2017-06-23T21:17:44Z (GMT) No. of bitstreams: 1 MasterThesis_Lino_Mejia_FGV_Ficha.pdf: 4647982 bytes, checksum: 29d2e5446d8872f2ad94a5fac6a16c72 (MD5) / Made available in DSpace on 2017-06-23T21:47:22Z (GMT). No. of bitstreams: 1 MasterThesis_Lino_Mejia_FGV_Ficha.pdf: 4647982 bytes, checksum: 29d2e5446d8872f2ad94a5fac6a16c72 (MD5) Previous issue date: 2017-05-24 / Academics have performed several studies on variance decomposition of several types of performance in context of developed economies. Nevertheless, empirical research of variance decomposition in emerging economies is more limited than that of developed economies. This study analyzes the variance decomposition of Peruvian enterprises in the period between 2010 and 2014, employing multidimensional performance measures, and thus two objectives are present. Firstly; determine the financial performance variance composition and compare this with developed economies. Secondly; determine the variance composition of productivity and compare it with the variance structure of financial performance. This empirical research is based on an original longitudinal dataset which contains financial, production and labour market information at firm level and it uses the Hierarchical Lineal Model (HLM) which provides conceptual and robust statistics for analyzing the nested structure of the data. Regarding the first objective, the empirical results demonstrate that the industry effect account for 34% and the firm effect account for 66% of the variance explained. This differs with previous studies such as Makino et al. (2004) who presented an industry effect of 18% of the variance explained in a developed economy. Regarding the second objective, three measures of performance are used to capture the multidimensional nature of performance. The dimensions are financial (measured as ROA and ROS) and operational (measured as productivity). The findings show that operational productivity model explain 65% of their variability; whereas the ROA and ROS explain 55% and 61% respectively. This study also confirms that the variance structure impacts the performance of each aggregate sector separately. For manufacturing, the result show that the percentage of industry effect is stronger than that of other aggregate sectors. For service, the industry effect (when it uses profitability measures) show similar values with some studies in the Latin American context. Finally; for wholesale & retail trade, the results confirm that the industry effect is lower than the other aggregate sector, and shows values around 4%, and therefore, firm effect ranges between 40% and 70% of the total variance. / Académicos han realizado varios estudios sobre la descomposición de varianza utilizando diversas clases de desempeño y principalmente en contexto de economías desarrolladas. Sin embargo, investigaciones empíricas sobre descomposición de la varianza en economías emergentes es más limitada que en contexto de economías desarrolladas. El presente estudio analiza la descomposición de la varianza en una muestra de empresas peruanas durante el período 2010-2014, empleando medidas de desempeño multidimensionales y, por lo tanto, dos objetivos de investigación son presentados. Primero; determinar la composición de la variación del rendimiento financiero y comparar estos resultados con los estudios en economías desarrolladas. Segundo; determinar la composición de la varianza de la productividad y compararla con la estructura de la varianza del rendimiento financiero. Esta investigación empírica se sustenta en una exclusiva base de datos en panel, los cuales contienen información financiera, de producción y de mercado de trabajo a nivel de empresa y además utiliza el Modelo Lineal Jerárquico (MLJ) el cual proporciona un método conceptual e robusto para analizar datos jerárquicos. En cuanto al primer objetivo, los resultados empíricos demuestran que el efecto industria representa el 34% y el efecto firma representa el 66% de la varianza explicada. Estos resultados difieren con estudios previos como Makino et al. (2004), quienes encontraron un efecto industria del 18% de la varianza explicada en un contexto de economía desarrollada. Con respecto al segundo objetivo, se utilizan tres medidas de rendimiento para captar la naturaleza multidimensional del desempeño. Las dimensiones son financieras (medidas como ROA y ROS) y operacional (medidas como productividad). Los resultados muestran que el modelo de productividad operacional explica el 65% de su variabilidad; Mientras que el ROA y el ROS explican el 55% y el 61%, respectivamente. Este estudio también confirma que la estructura de la varianza depende del desempeño de cada sector agregado. En el sector de manufactura, el resultado muestra que el porcentaje del efecto industria es más fuerte que el de otros sectores agregados. Para el sector servicio, el efecto industria (cuando utiliza la rentabilidad) muestran valores similares en estudios en el contexto latinoamericano. Finalmente; para el sector de comercio, los resultados confirman que el efecto industria es menor en comparación a los otros sectores, y muestra valores alrededor del 4%, y por lo tanto, el efecto firma oscila entre 40% y 70% del total de la varianza. / Acadêmicos têm realizado vários estudos sobre a decomposição da variância de vários tipos de desempenho no contexto de economias desenvolvidas. Não obstante, a investigação empírica da decomposição da variância nas economias emergentes é mais limitada do que a das economias desenvolvidas. Este estudo analisa a decomposição da variância das empresas peruanas no período entre 2010 e 2014, empregando medidas de desempenho multidimensionais, e, portanto, dois objetivos se fazem presentes. Primeiramente; determinar a composição da variância do desempenho financeiro e compará-la com as das economias desenvolvidas. Em segundo lugar; determinar a composição da variância da produtividade e compará-la com a estrutura de variância do desempenho financeiro. Esta pesquisa empírica é baseada em um conjunto de dados longitudinal original, que contém informação financeira, de produção e do mercado de trabalho a nível de empresa e usa o Modelo Hierárquico Linear (MHL), que oferece estatísticas robustas para analisar a estrutura hierárquica dos dados. Em relação ao primeiro objetivo, os resultados empíricos demonstram que o efeito setor responde por 34% e o efeito firma corresponde por 66% da variância explicada. Isso difere de estudos anteriores, como o de Makino et al. (2004) , que apresentou um efeito setor de 18% da variância explicada numa economia desenvolvida. Quanto ao segundo objetivo, três medidas de desempenho são usadas para capturar a natureza multidimensional do desempenho. As dimensões são financeiras (medidas como ROA, ROS, crescimento de ativos e receitas) e operacional (medida como produtividade). Os resultados mostram que o modelo de produtividade operacional explica 65% da sua variabilidade; enquanto que o ROA e ROS explicam 55% e 61% respectivamente. Este estudo também confirma que a estrutura da variância muda para cada setor agregado separadamente. Para manufatura, o resultado mostra que a percentagem do efeito setor é maior do que em outros setores agregados. Para serviços, o efeito setor (quando usada medidas de rentabilidade) mostra valores semelhantes com alguns estudos realizados no contexto latino-americano. Finalmente; para comércio atacadista e varejista, os resultados confirmam que o efeito setor é menor do que o outro setor agregado, e mostra valores em torno de 4%, e, portanto, o efeito firma varia entre 40% e 70% da variância total.

Cette thèse met en avant l’analyse du lien entre le marché de la dette de gouvernement, le risque souverain, la stabilité du système financier et le développement des marchés de la dette locale dans les pays émergents. Afin de remplir l’espace vide dans la littérature académique sur les flux obligataires j’ai construit une nouvelle base des données sur les détentions des obligations souveraines par les investisseurs domestiques et étrangers et, par conséquence, j’ai effectué une analyse empirique des déterminants des flux entrants et sortants par type d’investisseur et pays. Ainsi la thèse projette une image complète de la globalisation des marchés de la dette souveraine. / This PhD dissertation presents the analysis of the link between the government debt market, sovereign risk, financial stability and development of the local currency debt in emerging economies. The reserch contribution to the academic literature lies in the empirical analysis of capital flows in bond markets and, for this purpose, I constructed a novel database covering domestic and foreign holdings of government bonds in developed and emerging economies. As a result, this disertation projects a complete and coherent image of the globalisation of sovereign bond markets.

Por que mesmo entre os países com condições econômicas semelhantes o nível de desenvolvimento financeiro é tão diferente? Diversas variáveis políticas e institucionais já foram ressaltadas pela literatura, no entanto desconectadas uma das outras. Esse artigo visa contribuir para a questão fornecendo um modelo que analise as principais variáveis de forma concomitante, tornando endógena a interação entre elas. Para tanto, selecionamos uma amostra de países de renda média alta que compartilham de outras variáveis econômicas centrais e utilizamos o QCA (Qualitative Comparative Analysis), como método de análise. O estudo conclui que a estabilidade política é a única condição necessária, porém não suficiente. Entre aqueles países estáveis politicamente foi necessário mais um de dois atributos: um alto grau de proteção aos investidores minoritários ou, surpreendentemente, um regime político autocrático. / Why even among countries with similar economic conditions the financial development level is so different? Several political and institutional variables have already been highlighted in the literature, however disconnected from each other. This article aims to contribute to the issue by providing a model to analyze the main variables simultaneously, making endogenous the interaction between them. To achieve this, we selected a sample of middle-income countries who share other core economic variables and use the QCA (Qualitative Comparative Analysis) as the analysis method. The study concludes that political stability is the only necessary condition, but still not sufficient. Those politically stable countries need another one of attributes: a high degree of protection to minority investors or, surprisingly, an autocratic political regime.

Esta pesquisa inova ao investigar a associação de práticas de governança e de características específicas de fundos de pensão brasileiros com o desempenho dos investimentos. Déficits crescentes observados desde 2011, combinados com casos de corrupção e gestão temerária, são fatores que podem contestar a efetividade de fundos de pensão e lançar questionamentos sobre a previdência complementar fechada. O estudo utiliza dados coletados de demonstrações contábeis anuais auditadas de 2011 a 2015 de 41 fundos de pensão do país e que possuem sob a gestão 72% dos investimentos do total das entidades do Brasil. As informações sobre práticas de governança foram obtidas de relatórios internos dos fundos de pensão disponíveis em seus sítios eletrônicos e, também de plataformas eletrônicas como Bloomberg, LinkedIn e Google. Foi desenvolvido estudo quantitativo para investigar o problema de aspectos de governança e de características específicas em fundos de pensão brasileiros e que podem impactar de forma diferenciada o retorno dos ativos sob a gestão. O experimento do trabalho testou dados em painel através do método dos momentos generalizados em dois estágios com uso de variáveis instrumentais. Os resultados indicam evidências de impacto positivo no desempenho dos investimentos quando há uso de melhores práticas de governança como o comitê de investimentos. Sugere-se que estão sendo efetivos a avaliação e o controle de riscos sob esta prática e em benefício dos planos sob a gestão. Porém, há evidências de associação negativa de características no nível destas organizações sobre o retorno dos investimentos. Dentre as características que puderam ser observadas, os resultados sugerem que conexões com governo pelo tipo de patrocínio e existência de contratos de gestão externa dos investimentos por fundo de pensão com patrocinador do setor financeiro, podem influenciar a busca de outros interesses que não o melhor retorno aos planos de benefícios. Entretanto, a partir das mesmas características apresentam-se evidências de associação positiva com uso de melhores práticas de governança. Entende-se que pode haver o incentivo de se manter as condições para atendimento dos interesses políticos de suas relações. Os resultados desta pesquisa trazem contribuições para a discussão de características no nível dos fundos de pensão que podem influenciar o comportamento de seus executivos e para o debate da governança dessas organizações no país. Entende-se que estas contribuições podem ser aplicadas no contexto de demais economias emergentes. Por fim, a pesquisa sugere não ser óbvio que o monitoramento e controle pelos órgãos de supervisão e regulação atual sejam suficientes para evitar a evolução de déficits nos fundos de pensão e de impacto social no longo prazo. O argumento é que sem mecanismos de governança adequados às características no nível das entidades, os executivos em fundos de pensão podem não atuar no interesse único dos participantes dos planos de benefícios. / This research innovates by investigating the association of governance practices and specific characteristics of Brazilian pension funds with the performance of investments. Increasing deficits observed since 2011, combined with cases of corruption and reckless management, are factors that can challenge the effectiveness of pension funds and raise questions about closed private pension plans. The study uses data collected from audited annual financial statements between 2011 and 2015 from 41 pension funds that accounting for 72% of investments in this system. Information on pension fund governance practices was obtained from internal reports available on its websites and also from electronic platforms such as Bloomberg, LinkedIn, and Google. A quantitative study was developed to investigate the problem of governance aspects, and specific characteristics of them that may have a different impact on the return of assets under management. The work experiment tested panel data through the generalized method of moments (GMM) in two stages and use of instrumental variables. The results indicate evidence of a positive impact on the performance of asset under management in the use of governance best-practices such as investment committee. It is suggested that under this practice, risk assessment and control are being effective for the benefit of plans under the management of pension funds. However, there is evidence of a negative association at the organization-level on the return of investments. The results demonstrate that characteristics such as the government connections by the type of sponsorship and the outsourcing of the investment management by pension funds with sponsor from the financial sector can influence the pursuit of interests other than the best return of investments for the benefit plans. However, these same characteristics present evidence of a positive association with the use of governance best-practices. It is understood that the incentive would be to maintain the conditions to attend the political interests of their relations. The results of this research bring contributions to the discussion of characteristics at the level of pension funds that can influence the behavior of its executives and to the debate of their corporate governance in the country. It is understood that these contributions can be applied in the context of other emerging economies. Finally, this paper suggests that it isn´t obvious that monitoring and controlling by current supervisory and regulatory bodies are sufficient to avoid the evolution of deficits in pension funds and greater social impact in the long term. The argument is that without appropriated governance mechanisms to entity-level characteristics, pension fund executives may not act in the sole interest of participants.

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Die lateinamerikanischen Währungskrisen lenkten erst kürzlich wieder das Augenmerk auf die Gefahren wechselkursbasierter Stabilisierungen (WKBS). Dies sind Inflationsstabilisierungsprogramme, die den nominalen Wechselkurs als vorrangiges geldpolitisches Instrument einsetzen. Die vorliegende Dissertation dokumentiert die Wirkung der Stabilisierungen und präsentiert Erklärungsmodelle für deren stilisierte Fakten. Das erste Kapitel untersucht in Burns-Mitchell-Diagrammen typische reale und monetäre Effekte von 13 Stabilisierungsepisoden. Der anfängliche Anstieg des Konsums und des BIPs, die reale Aufwertung und die Verschlechterung der Leistungsbilanz sind dabei die auffälligsten stilisierten Fakten. Auf die Expansion folgt eine wirtschaftliche Abschwächung, d. h. niedrigeres oder Nullwachstum, falls die Stabilisierung noch andauert, und negative Wachstumsraten, falls das Programm bereits aufgegeben wurde. Die Kapitalimporte folgen einem ähnlichen Zyklus: Dem Anstieg zu Beginn der Stabilisierung folgt drei bis sechs Jahre später eine drastische Umkehr, die häufig mit dem Zusammenbruch des Programms einhergeht. Die Kurzlebigkeit von WKBS ist ein weiterer stilisierter Fakt: 70 % der betrachteten Stabilisierungen scheiterten innerhalb von 10 Jahren. Die anfängliche reale Aufwertung während WKBS wird meist als Anstieg des relativen Preises nicht-handelbarer Güter modelliert; empirische Ergebnisse hingegen unterstreichen die Bedeutung der internationalen Preisunterschiede handelbarer Güter. Kapitel 2 untersucht diese Ursachen durch die Anwendung von Engels Methode der Varianzzerlegung auf den realen Wechselkurs zwischen Brasilien und den USA. Die Ergebnisse bestätigen dabei sowohl die Modelle als auch den empirischen Befund: Bei Betrachtung der gesamten Stichprobe (von Januar 1981 bis Mai 2001) bestimmen Veränderungen der Preise handelbarer Güter und des nominalen Wechselkurses nahezu die gesamten Bewegungen des realen Wechselkurses. Während Perioden fester Wechselkurse hingegen sind die Preise nicht-handelbarer Güter von ähnlicher Bedeutung. Aufgrund dieses Ergebnisses wird in den in Kapitel 3 und 4 präsentierten Modellen der reale Wechselkurs in Abhängigkeit des relativen Preises nicht-handelbarer Güter dargestellt. Diese Modelle bilden kleine, offene Volkswirtschaften ab, die von nutzenmaximierenden repräsentativen Agenten mit perfekter Voraussicht bevölkert sind. Monetäre Größen sind aufgrund von cash-in-advance- Beschränkungen von Bedeutung. Weitere wichtige Modellelemente sind die Existenz von Marktimperfektionen (Preisstarrheiten und unvollständige Kapitalmobilität) sowie die mangelnde Glaubwürdigkeit der Stabilisierung. In Kapitel 3 ist diese durch die Antizipation einer Währungskrise à la Krugman (1979) begründet. Die reale Aufwertung kann dann mit vorausblickender Preissetzung der monopolistischen Produzenten nicht-handelbarer Güter erklärt werden: Aufgrund von Preisstarrheiten erhöhen diese ihre Preise in Erwartung der Währungsabwertung. Da die Preise handelbarer Güter durch das Gesetz des einheitlichen Preises bestimmt werden, folgt daraus ein Anstieg des relativen Preises nicht-handelbarer Güter und eine reale Aufwertung. Zudem wird aufgrund intertemporaler Konsumsubstitution der anfängliche Konsumboom reproduziert. Ökonometrische Evidenz bestätigt den Preissetzungsmechanismus: KQ-Schätzungen mit monatlichen mexikanischen Daten zeigen für Perioden fester Wechselkurse einen signifikanten positiven Zusammenhang zwischen dem relativen Preis nicht-handelbarer Güter und dem mexikanisch-US-amerikanischen Zinsdifferential als Approximation der Abwertungserwartung. Während das Ende der Stabilisierung in obigen Modell durch eine fundamentale Inkonsistenz von Wechselkursziel und Staatsausgaben bedingt ist, zeigt Kapitel 4, daß der Zusammenbruch auch aus sich-selbst-erfüllenden Erwartungen resultieren kann. Ein wesentliches Element ist dabei die Begrenzung der internationalen Kapitalmobilität. Diese erlaubt es, sowohl den anfänglichen Konsumboom als auch das Ende der Stabilisierung mit Erwartungen bezüglich der Dauer des Pegs und der nachfolgenden Geldpolitik zu erklären. Zusammenfassend zeigt die Dissertation die Gefahren wechselkursbasierter Stabilisierungen auf: Im Gegensatz zur herkömmlichen Meinung sind sogar relativ erfolgreiche und langlebige WKBS mittelfristig mit einer Kontraktion verbunden; nur wenige Programme erzielen eine nachhaltige Reduktion der Inflation. Die hier präsentierten Modelle zeigen, daß die mangelnde Glaubwürdigkeit der Programme - selbst wenn diese nicht durch Fundamentaldaten gerechtfertigt ist - zu Allokationsverzerrungen führt und den Erfolg der Stabilisierungsmaßnahmen gefährdet. / 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 ERBS. Capital inflows follow a similar boom-bust cycle: Their increase at the stabilization''s inception is followed by a sharp reversal three to six years later, very often coinciding with the program''s collapse. This transitoriness of ERBS constitutes an additional stylized fact: 70 % of the programs under consideration failed within 10 years after their implementation. The origin of the initial real exchange rate appreciation during ERBS has been subject to controversy: Most models assume an increase in the relative price of non-traded goods. Empirical findings, in contrast, emphasize the contribution of traded goods'' cross-country prices. Chapter 2 sheds light on this issue by applying Engel''s (1995) method of variance decomposition on Brazilian-US real exchange rate fluctuations. The results confirm both the models and the empirical findings: When considering the full sample (from January 1981 to May 2001), changes in traded goods'' prices and the nominal exchange rate account for almost all of the observed real exchange rate movements. During periods of pegged exchange rates, however, non-traded goods'' prices are equally important for real exchange rate fluctuations. Thus, changes in relative non-tradables'' prices are incorporated as a determinant of real exchange rate fluctuations during ERBS in the theoretical frameworks presented in chapters 3 and 4. These explain the stylized facts in models of small, open economies populated by a utility-maximizing representative agent endowed with perfect foresight. Money matters due to cash-in-advance constraints. Further important features are the existence of market imperfections - price stickiness or imperfect capital mobility - and the stabilization''s deficient credibility. In chapter 3, the latter is due to the anticipation of a Krugman (1979)-style currency crisis. The initial real appreciation during ERBS can then be explained with forward-looking price setting by monopolistic non-tradable goods'' producers: These are subject to staggered price setting and incorporate the peg''s anticipated termination - i.e. higher future devaluation rates - by increasing their current prices. As tradables'' prices are determined by the law of one price, this implies higher relative non-tradables'' prices and thus a real exchange rate appreciation. Furthermore, due to intertemporal consumption substitution, the observed initial consumption boom is reproduced. Econometric evidence confirms the proposed price setting mechanism: Using the Mexican-US interest rate differential as an indicator for devaluation rate expectations, OLS regressions with monthly Mexican data find a significant positive relation between relative non-tradables'' prices and the interest rate spread during periods of pegged exchange rates. In the previous model, the stabilization effort collapses due to a fundamental inconsistency between the exchange rate target and government finance. Chapter 4 shows that the collapse can also result from self-fulfilling expectations. This is achieved by introducing partial international capital mobility. Given this constraint, both the initial consumption boom and the stabilization''s collapse can be shown to result from expectations about the duration of the peg and post-stabilization monetary policy. In conclusion, the dissertation points to the perils of ERBS in high inflation countries: Contrary to what is commonly believed, even relatively successful and long-lived exchange rate pegs are associated with a late slowdown; only very few ERBS are successful at stabilizing inflation rates in the medium and long run. The models show that stabilizations'' deficient credibility - regardless if justified by fundamentals or not - engenders real dynamics which distort economic activity and jeopardize the stabilization effort: The miracle of ERBS turns into a mirage.