Abstract
This research examines the constraint imposed by the external sector on growth in Ecuador in the time period 1980-2015 using cointegration techniques. The results are consistent with the theoretical framework used and conclude that the external sector does indeed hinder Ecuadorian growth. In the timespan analyzed, we found that Ecuador exhibits an elevated marginal propensity to import: when national income rises 1%, imports go up by 1.57%. Moreover, we show that exports are closely related in the short and long term with external income. One policy implication derived from this research is that two mechanisms to shore up economic growth in developing countries could involve bolstering domestic demand and diversifying export destinations.
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