Will an Independent Scotland Default on its Sovereign Debt?

On 18th September, Scotland is holding a referendum on whether it should secede from the Union (click here). There has been much debate as to what will happen the Scottish economy if it leaves the Union. What about its share of national debt? Will it default on it? This is where economic history gives us some insights.

The last time a country left the Union was in December 1921 when 26 of the historic counties of Ireland gained independence to form the Irish Free State. In a recent QUCEH working paper, Nathan Foley-Fisher (Federal Reserve Board) and Eoin McLaughlin (University of Edinburgh) look at what happened whenever Ireland left the Union and defaulted on its debt, leaving the British to pick up the tab!  You can access their paper here.