Dollarization and growth : a synthetic control approach to Ecuador and El Salvador’s cases.

This thesis examines the impact of full dollarization on economic growth in Ecuador and El Salvador by employing the synthetic control method. We find that, relative to the counterfactual built, these currency substitutions had no effect on real income per capita. We use placebo exercises to explore the statistical significance of our results. We intend to determine the validity of the method to monetary substitution questions. The paper concludes that there is no causal relationship between dollarization and economic growth, but that better insight into a country’s growth parameters can result in more robust findings.