Monetary endogeneity hypothesis in a dollarized economy: the Ecuadorian case (2015-2018)

Abstract

The objective of this paper is to analyze the theoretical bases of the post-Keynesian current corresponding to the hypothesis of monetary endogeneity and to establish its adjustments to a dollarized economy such as the Ecuadorian case. Through the methodology of instrumental variables, the econometric endogeneity caused by the simultaneity between the level of liquidity and the credit portfolio of commercial banks is corrected, using as an instrument the average of the maximum reference interest rate established by the Monetary Policy Board and Financial The main result obtained was the fulfillment of the hypothesis of monetary endogeneity under post-Keynesian horizontalist assumptions in a dollarized economy such as the Ecuadorian case.