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2016

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Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/106564

Fiscal sustainability and dollarization: the case of Ecuador

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Abstract

This article tries to disentangle the dynamic relationships between fiscal variables and economic activity in a small emerging economy characterized by full dollarization, namely, Ecuador. We find that fiscal policy in Ecuador seems to be sustainable, explained by its policy of debt payment through oil revenues, rather than by a fiscal discipline that dollarization is supposed to encourage. The non-oil tax revenues variable is a purely adjusting variable. This result suggests that in a dollarized country that cannot benefit from the 'seignorage' revenues, the reliance on volatile oil revenues and on smoothing tax revenues leaves the economy's fiscal sustainability vulnerable.

Related resource

https://doi.org/10.1080/00036846.2015.1114580

Subject

Política fiscal, Harmonització fiscal, Indústria petroliera, Producte interior brut, Equador

Subject (English)

Fiscal policy, Tax harmonization, Petroleum industry and trade, Gross domestic product, Ecuador

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MARÍ DEL CRISTO, María Lorena and GÓMEZ-PUIG, Marta. Fiscal sustainability and dollarization: the case of Ecuador. Applied Economics. 2016. Vol. 48, num. 23, pags. 2139-2155. ISSN 0003-6846. [consulted: 8 of October of 2026]. Available at: https://hdl.handle.net/2445/106564

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