Article source
Financial Times
Article date
Wed, Sep 3, 2014
On January 1 1993, Czechoslovakia split into Slovakia and the Czech Republic. The two new states opted to keep a monetary union. Thirty-three days later that union collapsed. Over the next five years, exports from each country to the other quickly fell as a share of total trade. Economists cite this as a dramatic example of the “border effect”, the lack of trade and capital flows between two areas due to a territorial limit. In a paper released on Tuesday, HM Treasury suggests that it also provides a warning to Scots: they will be poorer if they vote for independence for Scotland and for a formal border to be established near Hadrian’s Wall.