The Dollarization Process in Ecuador

This master thesis studies how institutional weaknesses, high financial Dollarization, and acute economic crisis determined the dynamics of official Dollarization in Ecuador. Accordingly, this work covers the available theory of Dollarization, the crisis period up to 2000 when the Ecuadoran government adopted the U.S. dollar as legal tender and the evolution of Ecuadoran economy since then till 2006. This work aims at contributing to a better understanding of this crisis, which has so far received little attention in economic literature, probably because of Ecuador's relatively low importance among developing and emerging countries. Still, the experience of Ecuador with Dollarization is of interest for the rest of Latin American countries and other emerging economies wrestling with the adoption of sound monetary policy in a world of increased financial integration but also volatility and instability. Economics students and interested readers will find appealing material for reflections on Dollarization and macroeconomic policy in the absence of monetary tools.