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Assets and liabilities and Scottish independence

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  • Angus Armstrong
  • Monique Ebell

Abstract

This paper considers how the economically important assets, liabilities, and institutions in the UK could be divided if Scotland becomes an independent country. We find that on the basis of any reasonable division of existing assets and liabilities, Scotland would begin its independence with a substantial debt burden and less scope for risk-sharing with the rest of the UK. In order to reduce this debt burden, an independent Scotland would have to adopt a restrictive fiscal stance for many years. We estimate that Scotland would need to run primary surpluses of 3.1 per cent annually in order to achieve a Maastricht definition debt-to-GDP ratio of 60 per cent after 10 years of independence. This would be more restrictive than the fiscal tightening in the UK over the last 4 years.

Suggested Citation

  • Angus Armstrong & Monique Ebell, 2014. "Assets and liabilities and Scottish independence," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 30(2), pages 297-309.
    • Handle: RePEc:oup:oxford:v:30:y:2014:i:2:p:297-309.
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    File URL: http://hdl.handle.net/10.1093/oxrep/gru017
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    1. Angus Armstrong, 2012. "Scotland's Currency and Fiscal Choices," National Institute Economic Review, National Institute of Economic and Social Research, vol. 219(1), pages 4-9, January.
    2. Angus Armstrong & Monique Ebell, 2013. "Scotland’s Currency Options," Discussion Papers 1302, Centre for Macroeconomics (CFM).
    3. Olivier J. Blanchard & Daniel Leigh, 2013. "Growth Forecast Errors and Fiscal Multipliers," American Economic Review, American Economic Association, vol. 103(3), pages 117-120, May.
    4. Alberto Alesina, 2002. "The Size of Countries: Does it Matter?," Harvard Institute of Economic Research Working Papers 1975, Harvard - Institute of Economic Research.
    5. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-251, April.
      • Barro, R.J. & Sala-I-Martin, X., 1991. "Convergence," Papers 645, Yale - Economic Growth Center.
      • Barro, Robert J. & Sala-i-Martin, Xavier, 1992. "Convergence," Scholarly Articles 3451299, Harvard University Department of Economics.
    6. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
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    Cited by:

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    3. Ostfeld, Rosemary & Reiner, David M., 2020. "Public views of Scotland's path to decarbonization: Evidence from citizens' juries and focus groups," Energy Policy, Elsevier, vol. 140(C).

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