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Scotland’s Currency Options

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  • Dr Monique Ebell

    ()

  • Dr Angus Armstrong

    ()

Abstract

This paper considers which currency option would be best for an independent Scotland. We examine three currency options: being part of a sterling currency union, adopting the euro, or having an independent currency. No currency option is the best when considered against all criteria. Therefore, making the decision requires deciding which criteria are most important. Recent events around the world, particularly in Europe, have shown that fiscal sustainability and currency arrangements cannot be considered in isolation. Hence, the share of the existing UK public debt that an independent Scotland would inherit is central to understanding its currency choices. We consider how the debt may be divided, and the ability of an independent Scotland to pay its share. For an independent Scotland to prosper it requires a 'hard' currency, one in which investors are willing to hold long-dated Scottish government debt at a reasonable price. A necessary condition for a 'hard' currency is that government solvency is always beyond doubt.

Suggested Citation

  • Dr Monique Ebell & Dr Angus Armstrong, 2013. "Scotland’s Currency Options," National Institute of Economic and Social Research (NIESR) Discussion Papers 415, National Institute of Economic and Social Research.
    • Handle: RePEc:nsr:niesrd:11600
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    File URL: http://www.niesr.ac.uk/sites/default/files/publications/dp415.pdf
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    1. Dr Monique Ebell & Dr Angus Armstrong, 2013. "Scotland’s Currency Options," National Institute of Economic and Social Research (NIESR) Discussion Papers 415, National Institute of Economic and Social Research.
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    Cited by:

    1. Angus Armstrong & Monique Ebell, 2014. "Assets and liabilities and Scottish independence," Oxford Review of Economic Policy, Oxford University Press, vol. 30(2), pages 297-309.
    2. Dr Monique Ebell & Dr Angus Armstrong, 2013. "Scotland’s Currency Options," National Institute of Economic and Social Research (NIESR) Discussion Papers 415, National Institute of Economic and Social Research.
    3. Ronald MacDonald, 2014. "An Independent Scotland’s Currency Options Redux: Assessing the Costs and Benefits of Currency Choice," CESifo Working Paper Series 4952, CESifo.
    4. Ronald MacDonald & Research Fellow CESifo Policy Group Munich, "undated". "An independent Scotland’s currency options redux: Assessing the costs and benefits of currency choice," Working Papers 2014_11, Business School - Economics, University of Glasgow.

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    1. Ronald MacDonald, 2014. "An Independent Scotland’s Currency Options Redux: Assessing the Costs and Benefits of Currency Choice," CESifo Working Paper Series 4952, CESifo.
    2. Ronald MacDonald & Research Fellow CESifo Policy Group Munich, "undated". "An independent Scotland’s currency options redux: Assessing the costs and benefits of currency choice," Working Papers 2014_11, Business School - Economics, University of Glasgow.
    3. Angus Armstrong & Monique Ebell, 2014. "Assets and liabilities and Scottish independence," Oxford Review of Economic Policy, Oxford University Press, vol. 30(2), pages 297-309.

    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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