Is It Possible to De-dollarize? The Case of Ecuador

The policy reform termed dollarization, adoption of a foreign currency as the domestic currency, is widely believed to be irreversible. The paper presents counter examples, while noting that the Latin American "hard pegs" present problems that are more complex. It then uses Ecuador, the longest-lasting of the recent dollarizers, to examine all aspects of the possibility and process of de-dollarizing. Presentation of economic performance before and after dollarization leads to consideration of possible steps that could maintain the policy. Examination of the benefits of de-dollarization follows, with careful consideration of how a process of de-dollarization might be implemented. Since Ecuador may embark on this course, the paper provides a comprehensive and necessary examination of the issues involved