DOLLARIZATION, A PROCESS OF FINANCIAL STABILITY IN ECUADOR

Ecuador dollarized its economy as a solution to the crisis of the 1990s, which was characterized by increased poverty, unemployment, massive closure of MSMEs, and the loss of savings in the financial system following the liquidation and closure of the country's largest banks (Filambanco; Progreso; Previsora), rampant inflation (Central Bank of Ecuador, 2005) eroded purchasing power, which increased the prices of basic necessities, and a volatile exchange rate with daily increases.The government's strategy to address the crisis was to increase inorganic issuance, which increased social uncertainty and economic turmoil.Political uncertainty and the lack of credibility in the financial system prevented adequate solutions from being found to address the crisis (Bekerman, 2001) .In this context, several alternatives were analyzed to address the crisis that shook the country's social and economic landscape.Monetary convertibility with the issuance of a new currency linked to a foreign currency, and the adoption of the dollar as the currency of circulation and acceptance among the population (Acosta, 2001) .The decision to adopt the US dollar had immediate positive effects in the short term, with the readjustment of prices for products and services (Jcome, 2004) , real estate, basic necessities, a reduction in credit interest rates, a drop in inflation, and renewed confidence in the financial system (Correa, 2004) .