Karen E Young

St. Kliment Ohridski University (Int'l School of Bulgarian Lang and Cult)

This project compares how two states, diverse in political history and cultural legacies, have elected similar economic policies with similar political and social ramifications. In each country, hyper-inflation and a weak banking system caused an economic crisis that toppled the ruling government and led to a severe and rare economic policy choice, a "restricted" monetary policy--to dollarize in Ecuador, and to create a currency board in Bulgaria. While lowering inflation and encouraging foreign investment, the policies did not resolve the problem of the informal economy. The study explains how the credibility of the reform process, the networks involved and past experiences with crisis perpetuate the informal or "grey" market, among other problems of institutionalization in the banking sector.