Dollarization in Ecuador, Economic Growth, Trade Balance, Impact on Ecuadorian Foreign Trade

The paper analyzes the adoption of the dollarization in Ecuador, a process through which the Sucre was replaced as the official currency, giving way for the dollar to fulfill the three main functions such as: a unit of account, a reserve of value, and means of payment. This was a result of a deep crisis that the country experienced due to misalignments in its fiscal and monetary policy, its ungovernability, and the lack of confidence of its population in the national currency. Beyond being a technical norm to face the economic instability experienced by the country, dollarization was given as a reaction to the crisis. Therefore, the conditions were not structured to give way to firm dollarization, and it was necessary to wait a few years to observe changes in the Ecuadorian economy. To observe the evolution of the Ecuadorian economy and the behavior of its international economic relations since the dollarization, the present work analyzes the macroeconomic variables—GDP and trade balance, for which a descriptive analysis is carried out based on statistical information obtained from the Central Bank of Ecuador, World Bank statistics, and information of the ECLAC. The author studies the macroeconomic variable (GDP and trade balance) using such tools as statistics that allows calculating the variations of the variables considered in the analysis and leads to several conclusions. Dollarization generates cyclical growth periods in Ecuador and high volatility in GDP variation rates. As for the trade balance, the analyzed results show that the country’s international economic relations require encouraging national exports with the intention of achieving a favorable balance of the trade balance for the country. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023.