Dolarización: efectos y riesgos en el caso ecuatoriano[Dollarization: effects and risks in the Ecuadorian case]

This paper analyzes the effects of dollarization on the trend and volatility of key Ecuadorian macroeconomic aggregates such as inflation and economic growth rates. Additionally, it analyzes whether the current account balance and the fiscal deficit, variables associated with the sustainability of dollarization, have undergone structural changes due to the mentioned monetary system. The results indicate that inflation experiences a negative trend that is worrisome because of the possible consequences on the stability of the financial system, while economic growth does not seem to have become more volatile than before dollarization. Regarding the fiscal deficit, there is evidence of a recent regime of high-sustained deficits that would lead to a fiscal consolidation with collateral effects on the macroeconomy. These effects are not related to dollarization, but may affect its sustainability. Finally, although the current account balance does not show a structural change since the implementation of dollarization, the balance of non-oil trade balance does appear to have undergone a change in its structure since 2000, as it presents greater deficits. There is evidence that this regime would have given way to another characterized by smaller deficits since the decline of oil prices in mid-2014.