Can Dollarization Constrain a Populist Leader? The Case of Rafael Correa in Ecuador

Rafael Correa’s presidency in Ecuador (2007 – 2017) exemplifies left-leaning populist regimes in Latin America. However, there is a key difference: Ecuador is a dollarized economy. This removes the possibility of fiscal dominance over monetary policy as is common in populist regimes. This paper studies how dollarization constraints a populist leader. We discuss the incentives of a budget constraint immune to monetization and the failed attempt to launch a national digital currency