ABSTRACT
Ecuador is a fairly small country (its 2012 population was about 14 million) that cannot be claimed to be systemically important, but the crisis that it experienced in late 1999 was notable for several reasons. First, Ecuador’s crisis was important from the standpoint of the international economy because it resulted in the first default on the Brady bonds that were created to resolve the 1980s debt crisis. Second, because Ecuador’s 1999 crisis was a triple crisis – including a currency crisis, a banking crisis, and a sovereign debt crisis – it provides a particularly dramatic illustration of how external events can interact with domestic vulnerabilities to create a combustible macroeconomic situation. Finally, unlike the other crises reviewed so far in this book, it resulted in the abandonment of the country’s currency.
