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

María de Lourdes RODRÍGUEZ-ESPINOSA and Ramón A. Castillo-Ponce

Applied Econometrics and International Development, 2017, vol. 17, issue 1, 89-100

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.

Keywords: Dollarization; Economic Synchronization; Common Cycles. (search for similar items in EconPapers)
JEL-codes: E42 F44 F33 (search for similar items in EconPapers)
Date: 2017
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