The macrofiscal effects of dollarization in Ecuador

Authors

  • Sebastián Londoño-Espinosa Investigador Independiente
  • Edison Reza-Paocarina Investigador Independiente
  • Adriana Morales-Noriega Escuela Superior Politécnica de Chimborazo image/svg+xml
  • Lenín Chamba-Bastidas Escuela Superior Politécnica de Chimborazo image/svg+xml
  • Lady Andrea León Serrano Facultad de Ciencias Empresariales de la Universidad Técnica de Machala y Grupo de investigación Eco Emprendimiento image/svg+xml https://orcid.org/0000-0001-5472-140X

DOI:

https://doi.org/10.4067/S0718-88702022000200099

Keywords:

Dollarization, macro-fiscal effects, synthetic control

Abstract

The research proposes to analyze the macro-fiscal effects of dollarization in Ecuador for GDP per capita, prices and, fiscal sector. The analysis is based on the synthetic control methodology, which seeks to build a synthetic Ecuador from the year 2000, with the figures provided by the control group countries, that is, a set of countries with similar socioeconomic characteristics that were not affected by the treatment, thus obtaining a counterfactual. Among the main results found, an impact of the measure is observed in the real sector, in the monetary sector and in the fiscal sector.

Downloads

Download data is not yet available.

Author Biography

Lady Andrea León Serrano, Facultad de Ciencias Empresariales de la Universidad Técnica de Machala y Grupo de investigación Eco Emprendimiento

Docente investigadora de la Universidad Técnica de Machala Escritora de libros y capítulos de libros

References

Abadie, A., Diamond, A., & Hainmueller, J. (2010). Synthetic control methods for comparative case studies: Estimating the effect of California’s tobacco control program. Journal of the American Statistical Association, 105(490), 493–505. https://doi.org/10.1198/jasa.2009.ap08746

Abadie, A., Diamond, A., & Hainmueller, J. (2011). Synth: An R package for synthetic control methods in comparative case studies. Journal of Statistical Software, 42(13), 1–17. https://doi.org/10.18637/jss.v042.i13

Abadie, A., & Gardeazabal, J. (2003). The economic costs of conflict: A case study of the Basque Country. American Economic Review, 93(1), 113–132. https://doi.org/10.1257/000282803321455188

Adhikari, B., & Alm, J. (2016). Evaluating the economic effects of flat tax reforms using synthetic control methods. Southern Economic Journal, 83(2), 437–463. https://doi.org/10.1002/soej.12152

Adhikari, B., Duval, R., Hu, B., & Loungani, P. (2018). Can reform waves turn the tide? Some case studies using the synthetic control method. Open Economies Review, 29(4), 879–910. https://doi.org/10.1007/s11079-018-9490-3

Alberola, E., Montero, M., Braun, M., & Cordella, T. (2006). Debt sustainability and procyclical fiscal policies in Latin America [with comments]. Economía, 7(1), 157–193. https://doi.org/10.1353/eco.2007.0000

Alesina, A., & Barro, J. (2001). Dollarization. American Economic Review, 91(2), 381–385.

Amaya, M. (2013). La dolarización y el crecimiento económico [Dollarization and economic growth]. https://www.academia.edu/41589013/La_dolarizaci%C3%B3n_y_el_crecimiento_econ%C3%B3mico

Anderson, A. (2016). Dollarization: A case study of Ecuador. Journal of Economics and Development Studies, 4(2), 56–60.

Andrade, E. (2019). Evaluación del impacto de un conjunto de políticas de seguridad sobre la tasa de homicidios en el Ecuador (2007-2014): Método de control sintético [Impact evaluation of a set of security policies on the homicide rate in Ecuador (2007-2014): Synthetic control method] [Tesis de maestría, Flacso Sede Ecuador].

Banco Central del Ecuador. (2020). Información estadística [Statistical information]. https://www.bce.fin.ec/

Banco Mundial. (2020a). Información estadística [Statistical information]. https://datos.bancomundial.org/indicador

Banco Mundial. (2020b). Clasificación histórica de ingresos por país [Historical income classification by country]. https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-and-lending-groups

Barro, R. (1979). On the determination of the public debt. Journal of Political Economy, 87(5, Part 1), 940–971. https://doi.org/10.1086/260807

Beckerman, P., & Solimano, A. (2002). Crisis and dollarization in Ecuador: Stability, growth, and social equity. The World Bank. https://openknowledge.worldbank.org/handle/10986/14256. https://doi.org/10.1596/0-8213-4837-x

Berg, M. (2000). The pros and cons of full dollarization. International Monetary Fund. https://www.imf.org/external/pubs/ft/wp/2000/wp0050.pdf

Bertrand, M., Duflo, E., & Mullainathan, S. (2004). How much should we trust differences-in-differences estimates? The Quarterly Journal of Economics, 119(1), 249–275.

Bogetic, Z. (2000). Official dollarization: Current experiences and issues. Cato Journal, 20(2), 179–213.

Bohn, H. (1998). The behavior of U.S. public debt and deficits. The Quarterly Journal of Economics, 113(3), 949–963.

Calderón, J., & Zambrano, S. (2019). El impacto de la dolarización en el sistema económico: Caso Ecuador 2000-2016 [The impact of dollarization on the economic system: The case of Ecuador 2000-2016]. ECA Sinergia, 10(1), 38–58. https://doi.org/10.33936/eca_sinergia.v10i1.1109

Caputo, R., Liendo, F., & Medina, J. (2006). Modelos neokeynesianos para Chile durante el período de metas de inflación: Un enfoque estructural [New Keynesian models for Chile during the inflation targeting period: A structural approach]. Economía Chilena, 9(3), 73–95.

Castillo-Ponce, R., Truong, B., & Rodriguez, M. (2021). Dollarization and economic interdependence: The case of Ecuador. Revista de Análisis Económico-Economic Analysis Review, 36(1), 85–101. https://doi.org/10.4067/s0718-88702021000100085

Dées, S., & Zorell, N. (2012). Business cycle synchronisation: Disentangling trade and financial linkages. Open Economies Review, 23(4), 623–643. https://doi.org/10.1007/s11079-011-9208-2

Domínguez, R., & Caria, S. (2016). Ecuador en la trampa de la renta media [Ecuador in the middle-income trap]. Problemas del Desarrollo, 47(187), 89–112. https://doi.org/10.1016/j.rpd.2016.10.004

Dornbusch, R. (2001). Fewer monies, better monies. American Economic Review, 91(2), 238–242. https://doi.org/10.1257/aer.91.2.238

Doudchenko, N., & Imbens, G. (2016). Balancing, regression, difference-in-differences and synthetic control methods: A synthesis (Working Paper N.º 22791). National Bureau of Economic Research. https://www.nber.org/system/files/working_papers/w22791/w22791.pdf

Edwards, S., & Magendzo, I. (2003). Dollarization and economic performance: What do we really know? International Journal of Finance & Economics, 8(4), 351–363.

Fernández, C., & Garcia, P. (2015). The impact of the euro on euro area GDP per capita (Documento de Trabajo N.º 1530). Banco de España. https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/15/Fich/dt1530e.pdf

Fernández, J. (2017). Elementos de análisis para la sostenibilidad de una economía dolarizada [Elements of analysis for the sustainability of a dollarized economy]. Revista Economía, 69(109), 189–212.

Galiani, S., & Quistorff, B. (2017). The synth runner package: Utilities to automate synthetic control estimation using synth. The Stata Journal, 17(4), 834–849. https://doi.org/10.1177/1536867x1701700404

Garcia-Lembergman, E., Rossi, M., & Stucchi, R. (2018). The impact of export restrictions on production: A synthetic control approach. Economía, 18(2), 147–173. https://doi.org/10.1353/eco.2018.a694087

Gastambide, A. (2010). El camino hacia la dolarización en Ecuador [The road to dollarization in Ecuador]. Flacso Sede Ecuador.

Gavin, M., Hausmann, R., Perotti, R., & Talvi, E. (1996). Managing fiscal policy in Latin America and the Caribbean: Volatility, procyclicality, and limited creditworthiness (Working Paper N.º 326). Inter-American Development Bank.

Ghosh, A., Kim, J., Mendoza, E., Ostry, J., & Qureshi, M. (2013). Fiscal fatigue, fiscal space and debt sustainability in advanced economies. The Economic Journal, 123(566), F4–F30. https://doi.org/10.1111/ecoj.12010

Goldfajn, I., Olivares, G., Frankel, J., & Milesi-Ferretti, G. (2001). Full dollarization: The case of Panama [with comments]. Economía, 1(2), 101–155. https://doi.org/10.1353/eco.2001.0003

Griffin, K. (2001). Desarrollo humano: Origen, evolución e impacto [Human development: Origin, evolution and impact]. Revista de Economía Mundial, 25(5), 217.

Hahn, J., & Shi, R. (2017). Synthetic control and inference. Econometrics, 5(4), 52. https://doi.org/10.3390/econometrics5040052

Herrera, B., & Caballero, J. (2002). Dolarizar: ¿Realmente un dilema? [To dollarize: Really a dilemma?]. Cuadernos de Economía, 21(36), 99–152.

Hidalgo, F. (2002). La dolarización ecuatoriana [Ecuadorian dollarization]. Revista de Análisis del Banco Central de Bolivia,, 79.

Jahan, S., & Mahmud, A. (2013). ¿Qué es la brecha del producto? [What is the output gap?]. Finance & Development, 50(3), 38.

Londoño, S. (2019). Función de reacción fiscal para Ecuador, 2000-2017 [Fiscal reaction function for Ecuador, 2000-2017] [Tesis de maestría, Flacso Sede Ecuador].

Lopez, L., & Ayala, R. (2009). El proceso de dolarización en el Ecuador: Factores determinantes [The dollarization process in Ecuador: Determining factors] [Tesis de grado, Espol].

Marí, M., & Gómez, M. (2016). Fiscal sustainability and dollarization: The case of Ecuador. Applied Economics, 48(23), 2139–2155. https://doi.org/10.1080/00036846.2015.1114580

McClelland, R., & Gault, S. (2017). The synthetic control method as a tool to understand state policy. Urban-Brookings Tax Policy Center.

Muñoz, N. (2010). Renta per cápita como medida de desarrollo económico en Latinoamérica [Per capita income as a measure of economic development in Latin America]. Equidad y Desarrollo, (14), 37–48.

Ontaneda, D. (2017). El impacto de la dolarización oficial en la profundización financiera en Ecuador [The impact of official dollarization on financial deepening in Ecuador]. Cuestiones Económicas, 27(1), 13–43.

Palley, T. (2003). The economics of exchange rates and the dollarization debate: The case against extremes. International Journal of Political Economy, 33(1), 61–82. https://doi.org/10.1080/08911916.2003.11042894

Phélan, M. (2011). Revisión de índices e indicadores de desarrollo: Aportes para la medición del buen vivir (sumak kawsay) [Review of development indices and indicators: Contributions to measuring good living (sumak kawsay)]. OBETS: Revista de Ciencias Sociales, 6(1), 69–96. https://doi.org/10.14198/obets2011.6.1.04

Quispe-Agnoli, M. (2002). Costs and benefits of dollarization [Ponencia]. LACC Conference on Dollarization and Latin America, Miami, Florida, Estados Unidos.

Quistorff, B. (2016). El paquete synth_runner: Utilidades para automatizar la estimación con control sintético [The synth_runner package: Utilities to automate synthetic control estimation]. https://blogs.iadb.org/efectividad-desarrollo/es/synth_runner/

Roca, R. (1999). Dolarización, cajas de convertibilidad y monedas regionales [Dollarization, currency boards and regional currencies]. Segunda Época, IV(14), 123.

Rodríguez, C. (2000). Dolarización [Dollarization]. Realidad y Reflexión, 1(1), 15–21.

Rosado, J. (2018). Usando el método de control sintético para analizar la efectividad del Protocolo de Kioto para reducir las emisiones de CO2, CH4 y N2O en España [Using the synthetic control method to analyze the effectiveness of the Kyoto Protocol in reducing CO2, CH4 and N2O emissions in Spain]. Revista de Economía del Rosario, 21(2), 341–379. https://doi.org/10.12804/revistas.urosario.edu.co/economia/a.7203

Rosenbaum, P. (2007). Interference between units in randomized experiments. Journal of the American Statistical Association, 102(477), 191–200. https://doi.org/10.1198/016214506000001112

Rosenberg, H. (1994). El índice de desarrollo humano [The human development index]. Boletín de la Oficina Sanitaria Panamericana, 117(2), 1–10.

Schmieding, H. (2009). The case against a common fiscal boost in Europe. Intereconomics, 44(1), 4–22. https://doi.org/10.1007/s10272-009-0273-3

Tas, B., & Togay, S. (2014). Efectos de la dolarización oficial en una pequeña economía abierta: El caso de Ecuador [Effects of official dollarization in a small open economy: The case of Ecuador]. Investigación Económica, 73(290), 51–86. https://doi.org/10.1016/s0185-1667(15)30008-4

Tornell, A., & Velasco, A. (2000). Fixed versus flexible exchange rates: Which provides more fiscal discipline? Journal of Monetary Economics, 45(2), 399–436.

Xu, Y. (2017). Generalized synthetic control method: Causal inference with interactive fixed effects models. Political Analysis, 25(1), 57–76. https://doi.org/10.1017/pan.2016.2

Additional Files

Published

2022-12-07

How to Cite

Londoño-Espinosa, S., Reza-Paocarina, E., Morales-Noriega, A., Chamba-Bastidas, L., & León Serrano, L. A. (2022). The macrofiscal effects of dollarization in Ecuador. Economic Analysis Review, 37(2), 99–130. https://doi.org/10.4067/S0718-88702022000200099

Issue

Section

Articles

Article usage

ViewsTimes this article's page was opened since the journal started recording statistics. One person can visit more than once.
119
DownloadsTimes the full text of this article (usually the PDF) was opened or downloaded.
308

All time, as recorded by the journal.

Among the top 17% by views · last 2 yearsCompared with all the journal's articles by views in the last 2 years, this one is among the top 17%.

Last 2 years: 103 views, 214 downloads.

CitationsTimes other scholarly works cited this article, according to OpenAlex and Crossref. The two indexes cover different sources, so their counts differ. : OpenAlex 8 · Crossref 8

Main countries of traffic origin:Countries this article was consulted from, according to the internet connection. They are not necessarily people. United States 33% · Ecuador 15% · Brazil 9%

2.59 downloads per view (journal average 1.65).Downloads of the full text for every abstract view of this article, compared with the whole journal.

Explore the journal's metrics