The rejection of a currency union by senior Westminster politicians does not necessarily rule out a deal being done to allow an independent Scotland to keep using the pound, a leading economist said.
Professor John Kay said he was "sceptical" about whether a agreement could be reached on a currency union with the rest of the UK if there is a Yes vote in September's referendum.
He said statements from Chancellor George Osborne, his Labour shadow Ed Balls and the Liberal Democrat Chief Secretary to the Treasury Danny Alexander in which they all ruled out entering into a currency union would make reaching such an agreement "more difficult" but did not rule out the possibility.
First Minister Alex Salmond has already dismissed the remarks from the three Westminster politicians as "bluff, bluster and bullying", arguing that a currency union would be in the best interests of both an independent Scotland and the remainder of the UK.
Prof Kay, a former director of the Institute for Fiscal Studies think tank who is now a visiting Professor of Economics at the London School of Economics, told Holyrood's Finance Committee that from "the point of view of Scotland a currency union with England would be the best outcome, if it could be negotiated".
He added: "I'm sceptical, I was sceptical about whether it could be negotiated even before the various announcements which have been made from Westminster this year.
"I don't think the announcements that have been made from Westminster this year rule out the possibility of having a currency union, if Scotland did indeed vote for independence, but they clearly make it more difficult."
Prof Kay suggested an independent Scotland continuing to use the pound without a formal agreement could be one solution to currency in a separate Scotland
"The unilateral option may have more to commend it than it seems at first sight, that Scotland would simply go on using the pound anyway in these circumstances," he said.
The economist said this would bring "stability" and would mean there would be no transaction costs between north and south of the border.
He added the disadvantage of this arrangement would be that an independent Scotland would "effectively not have any freedom in monetary policy" but went on to state: "I think the practical reality is that an independent Scotland would not really have any freedom in monetary policy anyway."
If the referendum resulted in a vote to leave the UK, Prof Kay said talks over a currency union would see "conditions laid down by the rest of the UK Treasury in these negotiations which I thing would be very difficult for a Scottish Government to accept, because the rest of the UK would be demanding controls over the banking system in Scotland and over fiscal policy in Scotland".
He told MSPs: "That's the almost intractable problem on which these negotiations would fail - that is there would be a demand for supervision of Scotland's fiscal policy which either Scotland would concede, in which case you would be conceding most of the economic policy levers you would hope to gain by independence, or else Scotland would refuse, in which case the monetary union could not go ahead in this form."
Professor Gavin McCrone, a former chief economic adviser to the Scottish Office, told the committee he believed it was "more likely in the end" that Scotland would adopt its own currency "even though it may start with an attempt to keep the same currency".
He added: "On the whole, I think that a separate currency but one pegged to sterling is the probably the long-run answer, that's what the Irish did for a long time, then they unpegged it when they went into the European exchange rate mechanism.
"Smaller countries very often do that, the Danes for example have kept their own currency but it is pegged to the euro, but that means they can alter it if they really have to."
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