Dollarisation did not prevent monetary financing, paper finds

Central Bank of Ecuador

A paper from the International Monetary Fund outlines how central banks in dollarised economies can nevertheless create new central bank money.

Central bank balance sheet expansion in a dollarised economy: the case of Ecuador, by Juan-Pablo Erraez and Julien Reynaud examines the case of Ecuador.

The paper shows how Ecuador’s authorities created unbacked central bank reserve money as a financing pathway. During the presidency of economist Rafael Correa (2007–2017), the central bank first bought

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