Cost and Benefit of Ecuador's Dollarization Experience

In 2000, Ecuador adopted the dollar as its official currency and gave up the sucre in a desperate move to halt inflation and help a distressed financial system. But dollarization, a substitute for deeper economic reforms, has been a mixed blessing and has had limited results. The measure brought temporary macroeconomic stability but did not ease other social and economic problems. Higher oil prices that have pushed up revenues and an increase in remittances from Ecuadoreans who have migrated abroad have helped Ecuador's economy, but also leave deeper problems unsolved. Many Ecuadoreans still resent dollarization because it has tarnished sovereignty, as monetary policy is no longer determined by Ecuador's Central Bank but by the Federal Reserve System.