DR Tim Rideout claims (Letters, February 19) that "almost nobody understands the actual process of creating a Scottish pound". Unfortunately, his letter casts doubt on his own understanding of this process. Since this is an important issue it is worth clarifying the various errors in his letter.

In the first place, there is confusion about the achievable level of foreign exchange reserves. It is simply wrong to associate the total level of sterling balances available in the Scottish economy with the potential total of foreign exchange reserves available to an independent Scotland. It is base money that determines the availability of foreign exchange reserves and base money is a very small fraction of the total money stock as his figure for Bank of England foreign exchange reserves amply demonstrates.

Secondly, there is a misunderstanding of the relevant balance of payments account for this debate. In the context of the evolution of foreign exchange reserves, the correct measure of the balance of payments is the current balance which includes not only net trade, but also net interest payments on net foreign assets and net factor payments. Although difficult to measure with the current available level of Scottish economic statistics, a broadly correct measure of this can be achieved by referring to Scotland fiscal position: a country’s fiscal deficit or surplus is generally mirrored as a current account deficit or surplus (that is, the twin deficit phenomenon).

So with a current fiscal deficit circa eight per cent of GDP an independent Scotland would be running a balance of payments deficit on its current account of around eight per cent. So, in order to generate the kind of foreign exchange that an independent Scotland would require to run a fixed exchange rate regime, that number would need to be turned around into a fiscal surplus entailing massive austerity. To put it differently, very conservative fiscal policies would need to be run in an independent Scotland to support a fixed exchange rate regime.

In terms of speculation, Dr Rideout seems to be unaware of the massive array of derivative assets that currently exist in today’s financial world. Doubtless the creation of a new Scottish currency, and associated government debt instruments would lead to an array of derivative assets which would be available to investors and speculators and the existence of such could provide an answer to his question: "So how would all those speculators start selling something that they don’t have?"

Ronald MacDonald,

Professor of Macroeconomics and International Finance,

Adam Smith Business School (Room 207 Gilbert Scott Building),

University of Glasgow, Glasgow.

DAVID Torrance's column critiques Common Weal's paper making the case for a Scottish Statistics Agency on the grounds that IT "implicitly buys into the view of GERS as a fundamentally flawed and even politically skewed set of figures" ("Why the SNP's roadmap to victory is mired in confusion", The Herald, February 19). This is a misreading of the paper as it neither seeks to do this implicitly or otherwise. We fully acknowledge that such flaws as were once found in the publication have been improved over the years but we also acknowledge that there are still limits to the conclusions which can be drawn from it. For example, our 2016 paper Beyond GERS explained what would have to change if one wanted to examine the finances of Scotland not as a devolved region of the UK but as a fully independent country – no serious economist or statistician claims that the publication in its present form projects beyond an event as profound as independence.

However, the point made about GERS in our latest paper is, I dare say, a rather dry and technical one about the limits of the ability to combine data between Scottish and UK publications. Despite the availability of three different measures of public spending covering Scotland and the UK – GERS, Public Expenditure Statistical Analyses (PESA) and Country and Regional Analysis ( CRA ) – it is not currently possible to fully disaggregate the level of public spending by certain government departments on certain functions in certain geographical areas. This is something which is certainly of interest to the people who work in data circles with whom we consulted extensively over the course of researching this project, but it is hardly a sign of a politically skewed fundamental flaw.

The case for a Statistics Agency is not simply limited to GERS nor do we seek to fatally undermine it as a measure of regional finances. However no-one, not even those who work with national statistics, denies that there are areas where further improvements to data gathering and dissemination can be made here or in any of the other case studies we highlight. The technology underpinning data gathering is now advanced enough that we can move away from limited surveys or extrapolations and interpolations from UK-wide datasets and towards direct use of administrative data, updated in real time. This deeper use of data can be used to create more nuanced policies and can enable the impact of those policies to be more easily tracked. We are confident that this outcome should be welcomed by all political parties, regardless of their thoughts on what those policies may be. In this regard, the call for a Scottish Statistics Agency is the very opposite of being politically skewed and we are happy to engage seriously with anyone who wishes to help bring it to realisation.

Dr Craig Dalzell,

Head of Research, Common Weal,

111 Union Street, Glasgow.

YOUR report on free ATM access contained the intriguing information that the threatened dearth of the machines follows "cash machine operator Link's plan to cut the fees paid to cash machine operators" ("Warning over ‘cash machine desert’ risk for Scots", The Herald, February 19).

This seems an exemplary instance of company "good housekeeping".

John McNeill,

50 Abbey Drive, Glasgow.