Dollarization in Ecuador: effects on foreign trade

Abstract

This paper analyzes the foreign trade of Ecuador from 1995 to 2015 and tries to show how the dollarization of the country has affected such trade by the gravity model. In order to see how the variables used in this study affect the exports and imports of the country and compare the results with the other 40 countries with the highest level of export, we have performed a regression with panel data by using the model named before. This is an interesting study since there are only few countries that fully adopted the currency of another country. What is more, this paper evidences how this borrowing benefits the country which adopts it as the results demonstrate that said dollarization has positively affected Ecuador.