EconStor >
The University of Utah, Salt Lake City >
Department of Economics, The University of Utah, Salt Lake City >
Department of Economics Working Paper Series, University of Utah >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/64471
  
Title:The limits to dollarization in Ecuador: Lessons from Argentina PDF Logo
Authors:Bradbury, Mathew
Vernengo, Matías
Issue Date:2008
Series/Report no.:Working Paper, University of Utah, Department of Economics 2008-12
Abstract:The paper sheds light on the apparent success of dollarization in Ecuador. The experience of Argentina with convertibility is used to anchor the analysis. Two key factors are seen to play the most important role: first, the behavior of the real exchange rate and second, the source of external resources. The papers explains that exogenous determinants of the real exchange rate- productivity growth, the value of the dollar, commodity prices- have tended to behave very differently over the respective life spans of the Argentine and Ecuadorian monetary regimes. Trends in these exogenous variables have favored positive trends in the Ecuadorian current account. However, as the paper shows, the critical element informing the sustainability of the currency remains the source of external funds. Whereas in Argentina the IMF and international capital flows were central in propping up the flawed regime, the fate of Ecuadorian experiment relies heavily on a surprising factor, remittances. Reliance on remittance income is seen as a stop gap that cannot secure sustainability of the monetary system and implies longer run consequences for lost development potential.
Subjects:Dollarization
Balance of Payments
Debt Sustainability
JEL:E52
F24
F31
O54
Document Type:Working Paper
Appears in Collections:Department of Economics Working Paper Series, University of Utah

Files in This Item:
File Description SizeFormat
583843247.pdf140.09 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/64471

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.