Triffin recommends replacing the Central Bank’s Organic Law with the Global Exchange Law (1947) and the Monetary Regime Law (1948). The Monetary Regime Law of 1948 assigned the BCE the role of fluidity supervisor to finance the country’s development, allowing the organization to pay to the alliance of the national economy during the Thirty Glorious 6, the period with the most remarkable macroeconomic stability in Ecuador’s economics. Furthermore, the Monetary Regime Law of entrenched new ideas: a Board of Directors of the BCE on which the Government sits; the ability to devalue the dollar for economic causes and implement contractionary policies; and the capacity to implement contractionary policies. The authority to provide loans to the Government and the producing sector; lastly, a secretarial system permits it to take on additional responsibilities. For more than three decades, this monetary regime effectively dealt with a succession of economic disruptions.
The foreign debt problem began in the 1980s and was precipitated by a spike in global interest rates in 1979. In addition to the economy’s imbalances, fiscal deficits, monetary devaluation, and high inflation, internal pressures from the private sector have been added to ensure that the state fixes its current debt difficulties. Furthermore, with the backing of the International Monetary Fund Bank, they implemented a new reform to rearrange the business as a whole and attempt to return to a growth trajectory. With this goal in mind, and within a new economic paradigm, 8 The Economic Regime and State Bank Law was passed in May 1992. The last one sought to give the BCE “autonomy” by separating it from consultations and political choices in the case of government-appointed authorities. Restricting the use of primary inputs and emphasizing indirect instruments to guide the exchange rate bond yields, and thus manage stable levels of inflation, and prohibiting the ECB from extending loans to the treasury. Underneath this legal regime, the nation entered a system of regulated fluctuating of the exchange rate. The ECB’s duty was primarily to intervene in the banking markets through cash tables, forex tables, and auctions of stability bonds (BEMs). Moreover,
The damages to private banks were publicized when the Government acquired the latter’s responsibilities.
As lender of last resort, the BCE inorganically created support liquidity credits so that the Deposit Guarantee Agency -AGD- could reimburse impacted depositors in cash 9. The country’s currency eventually lost trust, prompting the Executive to announce a bank holiday on March 8, 1999, freezing most citizens’ accounts. On January 9, 2000, the Executive declared the dollarization of the Ecuadorian economy to alleviate mounting civil discontent. In its present currency attributions, the US dollar supplanted the Ecuadorian Sucre, a legal entity that serves as a reserve of worth, a fiat currency, and an income method. The BCE could not create anything other than fractional currency and was required at a predetermined exchange rate.
Already budgeted for 2019, the financial system gradually returned to normalcy, although it took until 2004 for savings and sales to return to pre-financial crisis levels.
The Central Bank and its autonomy
Also, with the constitution, the BCE lost its “autonomy” and became a legal entity under public law responsible for implementing Executive Function 10’s monetary, credit, exchange, and financial policies. The 2008 Constitution also mandated a fundamental reorganization of current monetary and financial rules and the organizations in charge of developing and implementing economic policy. In terms, the ECB embarked on a new structural reform to modernize its function and meet the problems that have been thrown at it.
The Natural Law Reform of the Natural Financial and Monetary Code was authorized in May 2021 to defend currency devaluation, defining the Central Bank of Ecuador as a Legal Organization of Public Law, part of the Executive Function, and organizational, administrative, budgetary, and technological autonomy. It specifies the entity’s tasks as follows: ensuring that money flows in the country, monitoring the functioning and health of the economy, preserving and managing the global reserve, and managing the Liquidity Fund Trusts of the Commercial, Popular, and Unity Financial Sectors 11.
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