The economics of Scottish independence in an interdependent world

Andrew Hughes Hallett,

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Fri, 06/20/2014

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Europe's nations and regions Monetary policy

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Tags
monetary independence, currency union, Scotland, Scottish independence

Scottish independence in an interdependent world: New evidence

Andrew Hughes Hallett 20 June 2014

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Any economy must have a policy framework designed to manage the three basic macroeconomic imbalances:

  • The private financing (savings-investment) gap;
  • The public spending-revenues (fiscal) gap; and
  • The foreign financing (trade) gap.

These imbalances imply a need for financial regulation, fiscal rules, and a currency/monetary policy choice, respectively. A newly independent Scotland would be no exception.

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Topics:  Europe's nations and regions Monetary policy

Tags:  monetary independence, currency union, Scotland, Scottish independence

A well-designed sterling union will be needed if Scotland votes for independence

Oliver Harvey, George Saravelos 28 May 2014

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The currency options of an independent Scotland have become a crucial point of contention for both sides ahead of the September 2014 referendum. However, the debate has so far focused on the suitability of different regimes based on the optimal currency area framework or fiscal implications (Armstrong 2013). There has been little focus on the practical issues involved. This is problematic because a breakup of the sterling area would be historically unprecedented and uniquely complex.

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Topics:  Europe's nations and regions Monetary policy

Tags:  monetary independence, currency union, Bank of England, Currency unions, Scotland, sterling, Scottish independence

Moving closer? Changing patterns of labour mobility in Europe and the US

Mai Dao, Davide Furceri, Prakash Loungani 01 December 2013

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On 21 September 1992, four famous professors – Olivier Blanchard, Rudi Dornbusch, Stan Fischer, and Paul Krugman – took part in a panel discussion at MIT on the merits of the proposed European currency union. Echoing a view common among US-based academics at the time, all four agreed, according to a record of the event, that “a common European currency would have unfavourable economic repercussions.” Blanchard noted that “currency unification works in the US because labour can move between states. The labour mobility in Europe is negligible.”

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Topics:  Labour markets

Tags:  eurozone, euro, currency union, labour mobility

Why a collapse of the Eurozone must be avoided

Anders Åslund 21 August 2012

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Articles on a possible breakup of Eurozone either see it as a mere devaluation (Lachman 2010, Roubini 2011) or reckon that its collapse would amount to a major economic disaster (Buiter 2011, Cliffe et al. 2010, Normand and Sandilya 2011). It seems the latter is more likely. Large imbalances have accumulated between southern debtor countries and northern creditor countries. Any capping of these balances would disrupt the payments mechanism between the Eurozone countries and impede all economic activity (Åslund 2012).

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Topics:  EU policies Europe's nations and regions

Tags:  Habsburg Empire, currency union, Soviet Union, Eurozone crisis, Yugoslavia

Managing a fragile Eurozone

Paul De Grauwe 10 May 2011

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A monetary union is more than just a single currency and a single central bank. Countries that join a monetary union lose more than one instrument of economic policy. They lose their capacity to issue debt in a currency over which they have full control.

This separation of decisions – debt issuance on the one hand and monetary control on the other – creates a critical vulnerability; a loss of market confidence can unleash a self-fulfilling spiral that drives the country into default (see Kopf 2011). The economic logic of this is straightforward.

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Topics:  EU policies International finance

Tags:  currency union, Eurozone crisis

The macroeconomic costs and benefits of the Economic and Monetary Union

Roel Beetsma, Massimo Giuliodori 27 November 2009

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More than ten years since its start, the costs and benefits of the Economic and Monetary Union (EMU) in Europe continue to be debated. “Technically”, the EMU has been a success. There have been no disruptions in the financial markets as a result of the monetary unification, nor has there been economic chaos otherwise. The euro is accepted everywhere Overall, the ECB has fulfilled its obligations by keeping the area-wide inflation rate close to its target. However, the union has had to withstand substantial divergences in the business cycles of its member states.

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Topics:  EU institutions

Tags:  EMU, currency union, fiscal policy

Why have currency unions dissolved? A test of optimum currency area theory

Andrew K Rose 06 February 2008

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The euro’s success has piqued the world’s interest in currency unions. The Gulf Cooperation Council is planning to establish one by 2010, the South African Development Community by 2018 and plans for an Asian currency union have circulated for years. Peter Kenen and Ellen Meade have a new book that surveys the prospects for regional monetary integration around the globe.1

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Topics:  Global economy Monetary policy

Tags:  euro, EMU, monetary independence, currency union, membership

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