The Effects of Dollarization in Ecuador: Credit, Inflation, Investment Planning
Ecuador adopted the United States dollar as its legal tender in 2000 following a severe banking and currency crisis. That pivotal decision removed exchange rate swings against the dollar and placed monetary policy under the influence of the U.S. Federal Reserve. Dollarization reshaped the country’s macroeconomic landscape: it brought price stability and anchored inflation expectations, yet it also eliminated vital policy instruments such as a domestic lender of last resort, an autonomous interest rate framework, and the ability to finance fiscal gaps through money creation. These structural changes continue to shape credit conditions, inflation trends, and investment strategies in ways…