IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/58368.html
   My bibliography  Save this paper

Scotland's currency options

Author

Listed:
  • Armstrong, Angus
  • Ebell, Monique

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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Armstrong, Angus & Ebell, Monique, 2013. "Scotland's currency options," LSE Research Online Documents on Economics 58368, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:58368
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/58368/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    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. Bernoth, Kerstin & von Hagen, Jürgen & Schuknecht, Ludger, 2004. "Sovereign risk premia in the European government bond market," ZEI Working Papers B 26-2003, University of Bonn, ZEI - Center for European Integration Studies.
    5. von Hagen, Jurgen & Schuknecht, Ludger & Bernoth, Kerstin, 2004. "Sovereign Risk Premia in the European Bond Market," CEPR Discussion Papers 4465, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. Angus Armstrong & Monique Ebell, 2013. "Scotland’s Currency Options," Discussion Papers 1302, Centre for Macroeconomics (CFM).
    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.
    4. Angus Armstrong & Monique Ebell, 2013. "Scotland’s Currency Options," Discussion Papers 1302, Centre for Macroeconomics (CFM).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Angus Armstrong & Monique Ebell, 2013. "Scotland’s Currency Options," Discussion Papers 1302, Centre for Macroeconomics (CFM).
    2. 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.
    3. Canale, Rosaria Rita & De Simone, Elina & Spagnolo, Nicola, 2021. "Financial markets and fiscal discipline in the Eurozone," Structural Change and Economic Dynamics, Elsevier, vol. 58(C), pages 490-499.
    4. Peppel-Srebrny, Jemima, 2021. "Not all government budget deficits are created equal: Evidence from advanced economies' sovereign bond markets," Journal of International Money and Finance, Elsevier, vol. 118(C).
    5. Faruk, Balli, 2006. "New Patterns in International Portfolio Allocation and Income Smoothing," MPRA Paper 10121, University Library of Munich, Germany, revised 14 Aug 2008.
    6. L. Marattin & P. Paesani & S. Salotti, 2011. "Fiscal shocks, public debt, and long-term interest rate dynamics," Working Papers wp740, Dipartimento Scienze Economiche, Universita' di Bologna.
    7. repec:hal:spmain:info:hdl:2441/9909 is not listed on IDEAS
    8. Afonso, António & Arghyrou, Michael G. & Bagdatoglou, George & Kontonikas, Alexandros, 2015. "On the time-varying relationship between EMU sovereign spreads and their determinants," Economic Modelling, Elsevier, vol. 44(C), pages 363-371.
    9. Ejsing, Jacob & Lemke, Wolfgang, 2011. "The Janus-headed salvation: Sovereign and bank credit risk premia during 2008-2009," Economics Letters, Elsevier, vol. 110(1), pages 28-31, January.
    10. Lucjan T. Orlowski & Kirsten Lommatzsch, 2005. "Bond Yield Compression in the Countries Converging to the Euro," William Davidson Institute Working Papers Series wp799, William Davidson Institute at the University of Michigan.
    11. Arghyrou, Michael G. & Kontonikas, Alexandros, 2012. "The EMU sovereign-debt crisis: Fundamentals, expectations and contagion," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(4), pages 658-677.
    12. Van Hecke, Annelore, 2013. "Vertical debt spillovers in EMU countries," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 468-492.
    13. Salvador Barrios & Per Iversen & Magdalena Lewandowska & Ralph Setzer, 2009. "Determinants of intra-euro area government bond spreads during the financial crisis," European Economy - Economic Papers 2008 - 2015 388, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    14. Kirsten H. Heppke‐Falk & Guntram B. Wolff, 2008. "Moral Hazard and Bail‐Out in Fiscal Federations: Evidence for the German Länder," Kyklos, Wiley Blackwell, vol. 61(3), pages 425-446, August.
    15. Hoffmann Andreas, 2013. "The Euro as a Proxy for the Classical Gold Standard? Government Debt Financing and Political Commitment in Historical Perspective," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 19(1), pages 41-61, November.
    16. Simone Salotti & Carmine Trecroci, 2012. "Even worse than you thought: The effects of government debt on investment and productivity," EcoMod2012 4200, EcoMod.
    17. Vyprachticka, Terezie, 2011. "Could the Stability and Growth Pact be Substituted by the Financial Markets?," European Integration online Papers (EIoP), European Community Studies Association Austria (ECSA-A), vol. 15, September.
    18. Gunther Capelle-Blancard & Patricia Crifo & Marc-Arthur Diaye & Rim Oueghlissi & Bert Scholtens, 2016. "Environmental, Social and Governance (ESG) performance and sovereign bond spreads: an empirical analysis of OECD countries," Working Papers hal-01401718, HAL.
    19. Sanjay Kumar Rout & Hrushikesh Mallick, 2022. "Sovereign Bond Market Shock Spillover Over Different Maturities: A Journey from Normal to Covid-19 Period," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(4), pages 697-734, December.
    20. Gómez-Puig, Marta, 2008. "Monetary integration and the cost of borrowing," Journal of International Money and Finance, Elsevier, vol. 27(3), pages 455-479, April.
    21. Eleonora Cutrini & Giorgio Galeazzi, 2017. "External Public Debt, Trade Linkages and Contagion During the Eurozone Crisis," The World Economy, Wiley Blackwell, vol. 40(9), pages 1718-1749, September.

    More about this item

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:58368. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.