Dollarization history

History of dollarization

NAME: BRENDA HAROCOURSE: 2ND BGU "B" ELECTION YEAR: 2020-2021

Why did dollarization occur?

Ecuador officially adopted the dollar as legal tender in 1999, after the country suffered a major economic and inflationary crisis in the late 1990s.

Jamil Mahuad

On January 21, 2000, Mahuad was repeatedly criticized and pressured to leave the government. Popular discontent sparked demonstrations and social protests in response to harsh economic measures such as higher oil prices and a freeze on bank deposits, referred to as "national holiday." Mahuad then refused to leave Carondelet, however, the withdrawal of support by the military high command and the convulsive social demonstrations made him recognize, through a national chain the following day, that "an overthrown president does not resign, he is simply overthrown".

THE GOOD AND THE BAD

The good

The bad

• The risk of devaluation will be recovered and financing will be facilitated because it is more feasible to access credit in the financial system.
• Increased productivity of companies, since they could reduce their costs, especially financial costs.
• Benefits to wage earners and employees: the purchasing power of their salaries will not deteriorate, when, as economic analysts say, it is possible to reduce their costs, especially financial costs.

• Loss of monetary sovereignty.
• Loss of flexibility in monetary policy.
• The national government cannot devalue the currency or finance the budget deficit by creating inflation because it cannot issue money.
• Products will cost more, but after a process of adaptation, there will be stability.

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