Date of Defense

4-16-2024

Date of Graduation

4-2024

Department

Economics

First Advisor

Susan Pozo

Second Advisor

Michael Ryan

Keywords

Dollarization, Latin America, Ecuador, El Salvador

Abstract

Dollarization occurs when a country uses the US dollar or other foreign currency alongside or in place of the country’s domestic currency. This research seeks to understand the reasons countries dollarize and analyzes the extent that formal dollarization affects the economic wellbeing of dollarized countries in Latin America. The use of the US dollar is considerable in Latin America with Panama, Ecuador, and El Salvador being formally dollarized, and with Argentina currently considering formally adopting the US dollar. Using difference-in-difference techniques, I analyze the impact of dollarization on economic agents’ perceptions of the economy, on economic growth, and on inflation in Ecuador and El Salvador relative to non-dollarized economies in the Latin American region. The analysis is conducted using Latinobarometer survey data along with macroeconomic data from the World Bank Development Indicators database. The analysis result for inflation in Ecuador was statistically significant and the result for country-level perception of the economic situation in El Salvador was significant, but no other variables yielded significant treatment effects coefficients.

Access Setting

Honors Thesis-Open Access

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