Effect of Official Dollarization on Macroeconomic Performance and Money-Price Relationship in Ecuador
AbstractThis paper investigates effects of official dollarization on the macroeconomic performance of Ecuador using a time series perspective. More specifically, we investigate how dollarization effects inflation, GDP, inflation uncertainty and money-price relationship in Ecuador. There are four main findings of this study. First, inflation is lower after official dollarization. Second, GDP growth is higher after official dollarization when controlling for several other factors like rising oil prices and increase in the equity markets of emerging economies. Third, inflation uncertainty measured by inflation variance through GARCH is lower during official dollarization. Finally, money supply is endogenous after official dollarization and exogenous before official dollarization. As a result, we conclude that dollarization improved the macroeconomic performance of Ecuador and changed the money-price relationship in Ecuador.
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Bibliographic InfoPaper provided by Turkish Economic Association in its series Working Papers with number 2009/4.
Length: 18 pages
Date of creation: 2009
Date of revision:
Official Dollarization; Ecuador; Inflation uncertainty; GARCH model; Moneyprice relation; Endogeneity of money;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
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