El Salvador: Dollarization and Structural Change

Abstract

This paper shows the kind of economic growth that has taken place in the country in the period 1991-2016, from the perspective of structuralism and inclusive growth. With this purpose, it points out what previous studies have found on the subject both in Latin America, to have the regional context, and in the country, and carries out an update of the earlier results.
A special objective is the comparison of the results on the quality of economic growth in the periods of predollarization (1991/2000) and dollarization (2000/2016).
Based on a decomposition methodology of growth in the components of structural change and change between sectors, this study finds that the structural change was positive in the pre-dollarization period and negative in the dollarization period.
The main recommendation is to accompany a foreign exchange policy of competitive exchange rate of an industrial and technological policy such that, combined properly, lead to high and sustainable economic growth.