The impact of dollarization on the economy of Ecuador

Aim. The work aimed to assess the impact of dollarization on the economic stability of Ecuador, as well as propose measures to improve the economic resilience, taking into account the problems identified.

Objectives. The work seeks to analyze the dynamics of macroeconomic indicators of Ecuador since the introduction of dollarization (2000–2024), to reveal the relationship between the level of external debt, trade balance, reserves and economic growth; to assess the impact of dollarization on employment and social development; to develop recommendations for improving economic policy and reducing dependence on external factors.

Methods. The study is based on the analysis of statistical data from the Central Bank of Ecuador, the World Bank and other international financial organizations. The work employed the methods of econometric analysis, comparative research and correlation analysis to identify patterns in changes in macroeconomic indicators.

Results. Dollarization ensured the curbing of inflation and the exchange rate stability, but induced an increase in external debt and dependence on global financial markets. Ecuador’s trade balance remains deficit-plagued despite export growth, indicating a lack of competitiveness of the national economy. Unemployment has decreased since dollarization, but remains volatile, especially during crises (e.g.  2020). International reserve assets have increased, however their dynamics depend on oil price fluctuations, which increases the economy vulnerability.

Conclusions. Dollarization has partially stabilized the economy, but has limited the scope of monetary policy regulation. Economic policy should be complemented with social measures aimed at reducing unemployment and improving the standard of living of the population.

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