Can Dollarization Constrain a Populist Leader? The Case of Rafael Correa in Ecuador

34 Pages Posted: 20 Dec 2021 Last revised: 21 Feb 2023

See all articles by Nicolas Cachanosky

Nicolas Cachanosky

The University of Texas at El Paso; American Institute for Economic Research; UCEMA Friedman-Hayek Center for the Study of a Free Society

Alexander William Salter

Texas Tech University - Rawls College of Business; American Institute for Economic Research

Ignacio Savanti

UCEMA Friedman-Hayek Center for the Study of a Free Society

Date Written: December 17, 2021

Abstract

Rafael Correa’s presidency in Ecuador (2007 – 2017) exemplifies left-leaning populist regimes in Latin America. However, there is a key difference: Ecuador is a dollarized economy. This removes the possibility of fiscal dominance over monetary policy as is common in populist regimes. This paper studies how dollarization constraints a populist leader. We discuss the incentives of a budget constraint immune to monetization and the failed attempt to launch a national digital currency.

Keywords: Ecuador, dollarization, populism

JEL Classification: E50, P50

Suggested Citation

Cachanosky, Nicolas and Salter, Alexander William and Savanti, Ignacio, Can Dollarization Constrain a Populist Leader? The Case of Rafael Correa in Ecuador (December 17, 2021). AIER Sound Money Project Working Paper No. 2022-05, Free Market Institute Research Paper No. 3988413, Available at SSRN: https://ssrn.com/abstract=3988413 or http://dx.doi.org/10.2139/ssrn.3988413

Nicolas Cachanosky (Contact Author)

The University of Texas at El Paso

500 West University Avenue
El Paso, TX 79968
United States

HOME PAGE: http://https://www.utep.edu/

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

UCEMA Friedman-Hayek Center for the Study of a Free Society ( email )

Buenos Aires
Argentina

Alexander William Salter

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

HOME PAGE: http://awsalter.com

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

Ignacio Savanti

UCEMA Friedman-Hayek Center for the Study of a Free Society ( email )

Buenos Aires
Argentina

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