Please use this identifier to cite or link to this item: http://hdl.handle.net/2445/58433
Title: Pass-through in dollarized countries: should Ecuador abandon the U.S. Dollar? [WP]
Author: Marí del Cristo, María Lorena
Gómez-Puig, Marta
Keywords: Finances internacionals
Dòlar nord-americà
Mercat financer
Màrqueting de relacions
Equador
International finance
American dollar
Financial market
Relationship marketing
Ecuador
Issue Date: 2012
Publisher: Universitat de Barcelona. Institut de Recerca en Economia Aplicada Regional i Pública
Abstract: In this article we examine the convenience of dollarization for Ecuador today. As Ecuador is strongly integrated financially and commercially with the United States, the exchange rate pass-through should be zero. However, we sustain that rising rates of imports from trade partners other than the United States and subsequent real effective exchange rate depreciations are causing the pass-through to move away from zero. Here, in the framework of the Vector Error Correction Model, we analyse the impulse response function and variance decomposition of the inflation variable. We show that the developing economy of Ecuador is importing inflation from its main trading partners, most of them emerging countries with appreciated currencies. We argue that if Ecuador recovered both its monetary and exchange rate instruments it would be able to fight against inflation. We believe such an analysis could be extended to other countries with pegged exchange rate regimes.
Note: Reproducció del document publicat a: http://www.ub.edu/irea/working_papers/2012/201216.pdf
It is part of: IREA – Working Papers, 2012, IR12/016
URI: http://hdl.handle.net/2445/58433
ISSN: 2014-1254
Appears in Collections:Documents de treball (Institut de Recerca en Economia Aplicada Regional i Pública (IREA))

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