Topic updates

Currency options for an independent Scotland

Geoff Riley

4th August 2022

The choice of currency regime matters - and this new piece from the Economics Observatory makes for fascinating reading.

Whilst a second Scottish independence referendum in the near future looks unlikely, the pressure for another vote is growing and with it comes detailed scrutiny of the architecture of macroeconomic policy making for a future independent Scottish government.

Would Scotland choose to join the Euro Zone?

Might it take a leap and introduce their own currency?

Or would they favour - perhaps as an interim approach - continuing to use sterling in an approach known as "Sterlingisation."

These are not easy decisions to understand. But, as the article makes clear, Scotland's relatively weak fiscal and current account position will likely limit their options and constrain the freedom to follow an independent monetary and fiscal policy.

This is a good article to recommend for enrichment reading for Year 13 economists when they study exchange rate (currency) systems ad the costs and benefits of monetary union.

It might also be worth reading this: Independent Scotland will need its own currency, insists Richard Murphy (The National, July 2022)

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

© 2002-2022 Tutor2u Limited. Company Reg no: 04489574. VAT reg no 816865400.