50 WORLD POLITICS that is unique to stabilizations using the exchange rate as an anchor.17 Of course,our argument does not require a completely uniform and au- tomatic cycle but only a pattern suggesting the possibility that ERBS will provide a quick fix for governments facing elections.Yet even if all the other stylized facts were shown to be wrong,18 the existence of a"dis- tinctive consumption boom"is sufficient to underpin the political logic of our argument.Nonetheless,it is worth emphasizing that evidence suggests that the regularity appears more pronounced in Latin America than in other regions and that the recent studies question the general- izability of the phenomena more than its aptness for the Latin Ameri- can countries from which the stylized facts were initially derived and which are the focus of our study.19 To explain the enduring nature of exchange rate-based stabilizations despite their rather risky long-term prospects,we emphasize the polit- ical attractiveness of the arrangement for governments.Here we under- line the distinctive macroeconomic dynamics of exchange rate-based stabilizations versus those of money-based stabilizations.We argue that the adoption of nominal anchors and exchange rate-based stabilization policies are particularly attractive to governments with short time hori- zons.This is especially so for governments approaching elections in presidential systems where the electoral calendar is fixed.Correctly timed,the introduction of an ERBS program will produce a decline in inflation,a consumption boom,robust output growth,and a decline in unemployment.Sometimes in high-inflation economies,in Latin America and elsewhere,the critical economic issue before elections is inflation.Governments could try to combat inflation with a money- based stabilization,but that would entail a willingness to endure falling output and rising unemployment during the run-up to an election. With an exchange rate-based stabilization,by contrast,governments do not have to sacrifice output,consumption,and employment to bring down inflation-at least not in the short to medium term:"all good things go together"for at least a while.The strong economic perfor- mance and falling inflation help the incumbent government seeking re- 17Hamman (fn.16),134.Similarly,Easterly (fn.16)finds that '"consumption growth booms a bit more than output growth in the early years of stabilization"(p.84). is And they are probably not wrong,as Fisher,Ratra,and Vegh(fn.12)show:"For ERBS,GDP growth rises very sharply upon stabilization and then stays high until T+2 only to fall sharply in T+3," in"sharp contrast to non-ERBS stabilizations"(p.868).They also reaffirm the distinctive consumption boom pattern characteristic of ERBS. The evidence presented in Hamman(fn.16),for example,suggests that the ERBS syndrome is most pronounced in Latin America,and Easterly (fn.16)does not take issue with the stylized facts for Latin America itself,aiming only"to examine whether such stylized facts underlie the patterns de- tected here in a broader sample of inflation stabilizations"(p.89).that is unique to stabilizations using the exchange rate as an anchor.17 Of course, our argument does not require a completely uniform and au￾tomatic cycle but only a pattern suggesting the possibility that ERBS will provide a quick fix for governments facing elections. Yet even if all the other stylized facts were shown to be wrong,18 the existence of a “dis￾tinctive consumption boom” is sufficient to underpin the political logic of our argument. Nonetheless, it is worth emphasizing that evidence suggests that the regularity appears more pronounced in Latin America than in other regions and that the recent studies question the general￾izability of the phenomena more than its aptness for the Latin Ameri￾can countries from which the stylized facts were initially derived and which are the focus of our study.19 To explain the enduring nature of exchange rate–based stabilizations despite their rather risky long-term prospects, we emphasize the polit￾ical attractiveness of the arrangement for governments. Here we under￾line the distinctive macroeconomic dynamics of exchange rate–based stabilizations versus those of money-based stabilizations. We argue that the adoption of nominal anchors and exchange rate–based stabilization policies are particularly attractive to governments with short time hori￾zons. This is especially so for governments approaching elections in presidential systems where the electoral calendar is fixed. Correctly timed, the introduction of an ERBS program will produce a decline in inflation, a consumption boom, robust output growth, and a decline in unemployment. Sometimes in high-inflation economies, in Latin America and elsewhere, the critical economic issue before elections is inflation. Governments could try to combat inflation with a money￾based stabilization, but that would entail a willingness to endure falling output and rising unemployment during the run-up to an election. With an exchange rate–based stabilization, by contrast, governments do not have to sacrifice output, consumption, and employment to bring down inflation—at least not in the short to medium term: “all good things go together” for at least a while. The strong economic perfor￾mance and falling inflation help the incumbent government seeking re- 50 WORLD POLITICS 17 Hamman (fn. 16), 134. Similarly, Easterly (fn. 16) finds that “consumption growth booms a bit more than output growth in the early years of stabilization” (p. 84). 18 And they are probably not wrong, as Fisher, Ratra, and Végh (fn. 12) show: “For ERBS, GDP growth rises very sharply upon stabilization and then stays high until T+2 only to fall sharply in T+3,” in “sharp contrast to non-ERBS stabilizations” (p. 868). They also reaffirm the distinctive consumption boom pattern characteristic of ERBS. 19 The evidence presented in Hamman (fn. 16), for example, suggests that the ERBS syndrome is most pronounced in Latin America, and Easterly (fn. 16) does not take issue with the stylized facts for Latin America itself, aiming only “to examine whether such stylized facts underlie the patterns de￾tected here in a broader sample of inflation stabilizations” (p. 89). v56.1.043.schamis 3/2/04 4:29 PM Page 50