Emergency response to a twin banking and currency crisis in 1998-1999 in which the sucre lost roughly two-thirds of its value against the US dollar and a banking holiday wiped out depositor confidence. The government announced on 9 January 2000 a fixed conversion of 25,000 sucres per US dollar, full substitution of the sucre by the dollar as legal tender, and the surrender of any independent domestic monetary policy. The doctrine was that only a credible, externally-anchored monetary regime could end chronic inflation, restore bank deposits, and force fiscal discipline — at the cost of permanently losing a lender-of-last-resort function and the ability to devalue in response to real shocks. In practice inflation fell from triple digits in 1999-2000 to single digits by 2004, remittance inflows and high oil prices stabilised the external account, and the regime survived multiple later presidents — including Correa — who campaigned against it but did not repeal it.
Policy-content fingerprint — how the framework codes this movement on its axes
Surrenders monetary sovereignty and counter-cyclical tools.
References
Beckerman & Solimano eds. (2002), Crisis and Dollarization in Ecuador, World Bank
IMF Article IV Ecuador, 2003 and 2006 consultations
Jácome (2004), The Late 1990s Financial Crisis in Ecuador, IMF WP/04/12
Notes
Framework codes both the disinflation success (fact) and the loss of monetary policy instruments (fact). Subsequent correísta fiscal expansion 2007-2017 operated against this binding monetary constraint and is coded separately.