Dollarization and Semi-Dollarization in Ecuador
Over the 1980s and 1990s, GDP growth had stagnated because of oil export price volatility and natural disasters, the sacrifice of capital formation to heavy external public debt service, and incomplete and uneven structural reform. The exchange rat...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2001/07/1552023/dollarization-semi-dollarization-ecuador http://hdl.handle.net/10986/19595 |
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okr-10986-195952021-04-23T14:03:43Z Dollarization and Semi-Dollarization in Ecuador Beckerman, Paul BANK DEPOSITS BANK FAILURES BANK LOANS BANK PERFORMANCE BANK SAFETY BANKING SUPERVISION BANKING SYSTEM BANKS BONDS BUDGET FORMULATION CAPITAL MOBILITY CAPITAL PROJECTS CD CENTRAL BANK COMMERCIAL BANKS CONNECTED LENDING CORPORATE INCOME TAX DEBT DEBT SERVICE DECENTRALIZATION DEFICITS DEPOSIT ACCOUNTS DEVALUATION DOMESTIC BORROWING ECONOMIC ACTIVITY ECONOMIC GROWTH ECONOMIC PERFORMANCE ELECTRICITY ELECTRICITY GENERATION EMERGING MARKETS EMPLOYMENT EQUITY MARKETS EXCHANGE RATE EXPORTS EXTREME POVERTY FINANCIAL INSTITUTIONS FINANCIAL MANAGEMENT FINANCIAL MARKETS FINANCIAL PLANNING FINANCIAL SECTOR FINANCIAL TRANSACTIONS FISCAL DISCIPLINE FISCAL SURPLUS FOREIGN EXCHANGE GDP GDP DEFLATOR GLOBALIZATION GROSS FIXED CAPITAL FORMATION GROWTH RATE HOUSING ILLIQUIDITY IMPORTS INCENTIVE EFFECTS INCOME INDEXATION INFLATION INSURANCE INTEREST RATES INTERNATIONAL RESERVES LABOR MARKETS LEGISLATION LIQUIDATION LIQUIDITY LIQUIDITY CREATION M2 MACROECONOMIC ADJUSTMENT MACROECONOMIC POLICY MARKET POWER MONEY SUPPLY MULTIPLIER EFFECTS NATIONAL GOVERNMENTS NET EXPORTS NET IMPORTS OIL PAYMENTS ARREARS PENSIONS PORTFOLIOS PRIVATE CONSUMPTION PRIVATE SECTOR PRIVATIZATION PROPERTY VALUES PUBLIC DEBT PUBLIC EMPLOYMENT PUBLIC EXPENDITURE PUBLIC FUNDS PUBLIC SECTOR PURCHASING POWER REAL GDP REORGANIZATION SAVINGS SOCIAL SERVICES SOCIAL WELFARE STRUCTURAL ADJUSTMENT TAX TAX ADMINISTRATION TAX REFORM TAX REVENUE TAXATION TELECOMMUNICATIONS TIME DEPOSITS TRANSPORT TREASURY UNDERLYING PROBLEM UNDERVALUATION WEALTH Over the 1980s and 1990s, GDP growth had stagnated because of oil export price volatility and natural disasters, the sacrifice of capital formation to heavy external public debt service, and incomplete and uneven structural reform. The exchange rate depreciation that proved continually necessary to sustain the net-export surplus and limit external debt accumulation induced Ecuadorians to dollarize spontaneously. The 1998 shocks affected real economic activity--hence bank loan portfolios, and widened the fiscal and current acccount deficits. The external imbalance led to exchange rate depreciation. Dollar-denominated bank loans whose borrowers lacked dollar income increasingly turned non-performing. At the same time, the depreciation swelled the locla currency value of dollar deposit liabilities. Many depositors, fearing that banks had become unsafe, withdrew, and over 1999 the Central Bank had to provide banks massive liquidity support. By year's end, the resulting monetary issue led to the exchange rate collapse and incipient hyperinflation that forced the move to full dollarization. Ecuador's Central Bank will continue operating, using its foreign exchange holdings to carry out limited liquidity management and lender-of-last-resort activities. Ecuador's public accounts and banking system remain vulnerable to commodity-price and natural shocks. Exchange rate adjustment and monetary expansion are no longer available, however, to manage the external accounts, accommodate the public deficit, or assist failing banks. Further structural reform remains essential to assure fiscal discipline and banking system safety. 2014-08-21T19:50:50Z 2014-08-21T19:50:50Z 2001-07 http://documents.worldbank.org/curated/en/2001/07/1552023/dollarization-semi-dollarization-ecuador http://hdl.handle.net/10986/19595 English en_US Policy Research Working Paper;No. 2643 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Latin America & Caribbean Ecuador |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
BANK DEPOSITS BANK FAILURES BANK LOANS BANK PERFORMANCE BANK SAFETY BANKING SUPERVISION BANKING SYSTEM BANKS BONDS BUDGET FORMULATION CAPITAL MOBILITY CAPITAL PROJECTS CD CENTRAL BANK COMMERCIAL BANKS CONNECTED LENDING CORPORATE INCOME TAX DEBT DEBT SERVICE DECENTRALIZATION DEFICITS DEPOSIT ACCOUNTS DEVALUATION DOMESTIC BORROWING ECONOMIC ACTIVITY ECONOMIC GROWTH ECONOMIC PERFORMANCE ELECTRICITY ELECTRICITY GENERATION EMERGING MARKETS EMPLOYMENT EQUITY MARKETS EXCHANGE RATE EXPORTS EXTREME POVERTY FINANCIAL INSTITUTIONS FINANCIAL MANAGEMENT FINANCIAL MARKETS FINANCIAL PLANNING FINANCIAL SECTOR FINANCIAL TRANSACTIONS FISCAL DISCIPLINE FISCAL SURPLUS FOREIGN EXCHANGE GDP GDP DEFLATOR GLOBALIZATION GROSS FIXED CAPITAL FORMATION GROWTH RATE HOUSING ILLIQUIDITY IMPORTS INCENTIVE EFFECTS INCOME INDEXATION INFLATION INSURANCE INTEREST RATES INTERNATIONAL RESERVES LABOR MARKETS LEGISLATION LIQUIDATION LIQUIDITY LIQUIDITY CREATION M2 MACROECONOMIC ADJUSTMENT MACROECONOMIC POLICY MARKET POWER MONEY SUPPLY MULTIPLIER EFFECTS NATIONAL GOVERNMENTS NET EXPORTS NET IMPORTS OIL PAYMENTS ARREARS PENSIONS PORTFOLIOS PRIVATE CONSUMPTION PRIVATE SECTOR PRIVATIZATION PROPERTY VALUES PUBLIC DEBT PUBLIC EMPLOYMENT PUBLIC EXPENDITURE PUBLIC FUNDS PUBLIC SECTOR PURCHASING POWER REAL GDP REORGANIZATION SAVINGS SOCIAL SERVICES SOCIAL WELFARE STRUCTURAL ADJUSTMENT TAX TAX ADMINISTRATION TAX REFORM TAX REVENUE TAXATION TELECOMMUNICATIONS TIME DEPOSITS TRANSPORT TREASURY UNDERLYING PROBLEM UNDERVALUATION WEALTH |
| spellingShingle |
BANK DEPOSITS BANK FAILURES BANK LOANS BANK PERFORMANCE BANK SAFETY BANKING SUPERVISION BANKING SYSTEM BANKS BONDS BUDGET FORMULATION CAPITAL MOBILITY CAPITAL PROJECTS CD CENTRAL BANK COMMERCIAL BANKS CONNECTED LENDING CORPORATE INCOME TAX DEBT DEBT SERVICE DECENTRALIZATION DEFICITS DEPOSIT ACCOUNTS DEVALUATION DOMESTIC BORROWING ECONOMIC ACTIVITY ECONOMIC GROWTH ECONOMIC PERFORMANCE ELECTRICITY ELECTRICITY GENERATION EMERGING MARKETS EMPLOYMENT EQUITY MARKETS EXCHANGE RATE EXPORTS EXTREME POVERTY FINANCIAL INSTITUTIONS FINANCIAL MANAGEMENT FINANCIAL MARKETS FINANCIAL PLANNING FINANCIAL SECTOR FINANCIAL TRANSACTIONS FISCAL DISCIPLINE FISCAL SURPLUS FOREIGN EXCHANGE GDP GDP DEFLATOR GLOBALIZATION GROSS FIXED CAPITAL FORMATION GROWTH RATE HOUSING ILLIQUIDITY IMPORTS INCENTIVE EFFECTS INCOME INDEXATION INFLATION INSURANCE INTEREST RATES INTERNATIONAL RESERVES LABOR MARKETS LEGISLATION LIQUIDATION LIQUIDITY LIQUIDITY CREATION M2 MACROECONOMIC ADJUSTMENT MACROECONOMIC POLICY MARKET POWER MONEY SUPPLY MULTIPLIER EFFECTS NATIONAL GOVERNMENTS NET EXPORTS NET IMPORTS OIL PAYMENTS ARREARS PENSIONS PORTFOLIOS PRIVATE CONSUMPTION PRIVATE SECTOR PRIVATIZATION PROPERTY VALUES PUBLIC DEBT PUBLIC EMPLOYMENT PUBLIC EXPENDITURE PUBLIC FUNDS PUBLIC SECTOR PURCHASING POWER REAL GDP REORGANIZATION SAVINGS SOCIAL SERVICES SOCIAL WELFARE STRUCTURAL ADJUSTMENT TAX TAX ADMINISTRATION TAX REFORM TAX REVENUE TAXATION TELECOMMUNICATIONS TIME DEPOSITS TRANSPORT TREASURY UNDERLYING PROBLEM UNDERVALUATION WEALTH Beckerman, Paul Dollarization and Semi-Dollarization in Ecuador |
| geographic_facet |
Latin America & Caribbean Ecuador |
| relation |
Policy Research Working Paper;No. 2643 |
| description |
Over the 1980s and 1990s, GDP growth had
stagnated because of oil export price volatility and natural
disasters, the sacrifice of capital formation to heavy
external public debt service, and incomplete and uneven
structural reform. The exchange rate depreciation that
proved continually necessary to sustain the net-export
surplus and limit external debt accumulation induced
Ecuadorians to dollarize spontaneously. The 1998 shocks
affected real economic activity--hence bank loan portfolios,
and widened the fiscal and current acccount deficits. The
external imbalance led to exchange rate depreciation.
Dollar-denominated bank loans whose borrowers lacked dollar
income increasingly turned non-performing. At the same time,
the depreciation swelled the locla currency value of dollar
deposit liabilities. Many depositors, fearing that banks had
become unsafe, withdrew, and over 1999 the Central Bank had
to provide banks massive liquidity support. By year's
end, the resulting monetary issue led to the exchange rate
collapse and incipient hyperinflation that forced the move
to full dollarization. Ecuador's Central Bank will
continue operating, using its foreign exchange holdings to
carry out limited liquidity management and
lender-of-last-resort activities. Ecuador's public
accounts and banking system remain vulnerable to
commodity-price and natural shocks. Exchange rate adjustment
and monetary expansion are no longer available, however, to
manage the external accounts, accommodate the public
deficit, or assist failing banks. Further structural reform
remains essential to assure fiscal discipline and banking
system safety. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Beckerman, Paul |
| author_facet |
Beckerman, Paul |
| author_sort |
Beckerman, Paul |
| title |
Dollarization and Semi-Dollarization in Ecuador |
| title_short |
Dollarization and Semi-Dollarization in Ecuador |
| title_full |
Dollarization and Semi-Dollarization in Ecuador |
| title_fullStr |
Dollarization and Semi-Dollarization in Ecuador |
| title_full_unstemmed |
Dollarization and Semi-Dollarization in Ecuador |
| title_sort |
dollarization and semi-dollarization in ecuador |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2001/07/1552023/dollarization-semi-dollarization-ecuador http://hdl.handle.net/10986/19595 |
| _version_ |
1764440119335452672 |