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Can dollarization constrain a populist leader? The case of Rafael Correa in Ecuador

2022; Elsevier BV; Volume: 200; Linguagem: Inglês

10.1016/j.jebo.2022.06.006

1879-1751

Nicolás Cachanosky, Alexander William Salter, Ignacio Savanti,

Global Financial Crisis and Policies

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.