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In the latest National Institute Economic Review, published today, Dr. Angus Armstrong, Director of Macroeconomic Research at NIESR, examines the monetary and fiscal policy choices facing an independent Scotland. Leaving the politics aside, it is unclear what independence will involve and what it can deliver in a globalised economy. While lower cross-border barriers may have made small states more viable concerns, the irony is that the same economic forces also bring substantial restrictions.

Scotland's economy is highly integrated with the rest of the UK; it seems likely therefore that Scotland and the rest of the UK are an optimal currency area, so it would be sensible for an independent Scotland to continue to use the pound sterling. However, this would bring with it its own set of problems; as the example of the eurozone shows, using a currency which a parliament has no direct control over brings restrictions.

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