THE SNP declared another Unionist myth busted yesterday with the release of a report from the respected Fraser of Allander Institute suggesting the independence referendum in 2014 “did not appear to have been a major driver of volatility” on the financial markets.
The SNP’s Ivan McKee said the report “demolishes” claims that the referendum caused “a drag on Scotland’s economy”.
However, Murdo Fraser from the Tories said the SNP were “distorting” Fraser of Allander’s conclusions, and deliberately confusing the impact of the independence vote on share prices and the impact on the wider economy.
In their report, Referendums and Economic Volatility: Scotland 2014, the authors say that a referendum causes most uncertainty “when the outcome is in the balance,” as it was in Scotland and again with the EU vote.
Their examination looks at “the impact of the referendum itself on short-term financial market volatility,” rather than the impact of the outcome, and assesses market data for companies headquartered in Scotland whose shares were listed on the London Stock Exchange between January 2011 to December 2015.
Unsurprisingly, the authors say, given its sheer size, RBS has a big influence on the overall results. The UK Government became RBS’s biggest shareholder in 2008 when it bailed the bank out during the crisis.
In the report, the economists write: “Most listed companies operate in global markets and are impacted by the same issues – eg swings in stock market sentiment in Wall Street. Similarly, given the close linkages between the Scottish and rUK economies, the economic outlook for the UK will be highly correlated with the economic outlook for Scotland.”
“We also find, however, that the Scottish series tends to be slightly more volatile,” they write, but any volatility caused by the timing of the referendum “was actually relatively low in comparison to some other periods between 2010 and 2015. For example, the European debt crisis of 2011 can be clearly identified … as can the political uncertainty following the UK election in 2010.”
“When RBS is excluded from the series, we find that whilst the volatility of Scottish and FTSE stock returns tend to track one another relatively closely in the run-up to the 2014 referendum, the relative volatility of Scottish stock returns increased at the margin.”
They add: “But, when this relative difference is put in context of overall measures of volatility, the independence referendum does not appear to have been a major driver of volatility of either the FTSE or Scottish series compared to other events around this time. We find that global events – such as the Eurozone debt crisis – tended to have a much more significant impact.”
McKee said: “This report from the respected Fraser of Allander Institute demolishes one of the central myths around the 2014 independence referendum. It has come to a definitive conclusion in rubbishing the claims that the referendum had a damaging impact on Scotland’s economy – suggesting instead that any volatility was relatively minor compared to other global forces from that time.”
He added: “Claims from the opposition parties that the referendum was causing a drag on Scotland’s economy have been proven to be categorically untrue by this report – yet another example of scaremongering that has been proven false.”
However, Fraser said the SNP needed to look at the wider economy. “In their desperation to address criticism of their mismanagement of the Scottish economy, the SNP are completely distorting the message from the respected Fraser of Allander Institute," he said.
“What this report is saying is that the impact on share prices for Scottish companies during the 2014 referendum was marginal. However, we know from a wide range of comments from leading business figures that there was a much broader impact on the economy as a whole.”
Labour’s Jackie Baillie said: “Respected economists tell us that the impact of independence on the Scottish economy will be devastating”.
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