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Synchronization of Economic Activity between Dollarized Economies and the United States. The cases of Ecuador and El Salvador

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  • María de Lourdes RODRÍGUEZ-ESPINOSA
  • Ramón A. CASTILLO-PONCE

Abstract

We evaluate a possible consequence of dollarization: the synchronization of economic activity. The analysis considers the cases of Ecuador and El Salvador; both adopted the US dollar. The results of common cycles and cointegration tests suggest the existence of a common trend and a common cycle between the GDPs of Ecuador and the US after dollarization. For the case of El Salvador, a common trend was identified after dollarization but not before; no common cycles are evident in either period. We conclude that dollarization is associated with increased economic integration between the adopting countries and the US; as suggested by economic theory.

Suggested Citation

  • María de Lourdes RODRÍGUEZ-ESPINOSA & Ramón A. CASTILLO-PONCE, 2017. "Synchronization of Economic Activity between Dollarized Economies and the United States. The cases of Ecuador and El Salvador," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 17(1), pages 89-100.
    • Handle: RePEc:eaa:aeinde:v:17:y:2017:i:1_6
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    More about this item

    Keywords

    Dollarization; Economic Synchronization; Common Cycles.;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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