- Home
- Publications
- Scotland: Currency Options And Public Debt
Scotland: Currency Options and Public Debt
This paper considers which currency option would be best for an independent Scotland. We examine three currency options: being part of a sterling currency zone, 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, show that it is essential to consider how an independent Scotland would seek to adjust to adverse economic circumstances. In economists' terms, it is important to think through the ‘off-equilibrium’ adjustment paths of each of the currency options. The amount of public debt, and so the capacity for a fiscal response, is a critical determinant of these paths and therefore of the optimal currency choice. Since commitment to a currency union by an independent country can only be conditional, an independent Scotland might find it optimal to abandon the currency union in the future if the financial stability advantages to having its own currency begin to outweigh any disadvantages due to trade and transactions costs.
Related Blog Posts
Exploring the Data on UK Productivity Performance
Issam Samiri
Stephen Millard
11 Dec 2023
4 min read
UK Investment Past and Prospects: A Framework for Analysis
Catherine Mann
01 Dec 2023
6 min read
Where Are We With Regional Inequalities in the UK?
Adrian Pabst
Jagjit S. Chadha
01 Nov 2023
5 min read
Related Projects
Related News
Related Publications
UK Business Investment: Economists, Managers, Financiers
25 Apr 2024
UK Productivity Commission
Productivity and Investment: Time to Manage the Project of Renewal
12 Mar 2024
UK Productivity Commission
UK Households Should Start Feeling Better Off as Election Looms
07 Feb 2024
UK Economic Outlook