Sorry folks! No new blog posts today on how crap economic theory is and so forth. I’m still working on getting the Gradualis blog off its feet.
But for those of you interested in Scottish independence we have a post up today showing just how sensitive Scotland’s trade balance is to quantity and, most especially, price fluctuations in the oil markets.
This is the key issue surrounding Scottish independence from a macroeconomic perspective. It is obvious that they cannot keep oil and gas export revenues growing at pace with GDP forever. At which point, the trade balance will begin to deteriorate. The question moving forward is how they should manage this — and what sort of monetary framework is most appropriate to such potential macroeconomic volatility.