School of Economics

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Paul Mizen

Professor of Monetary Economics, Faculty of Social Sciences



Paul Mizen has been a member of the faculty in the School of Economics at Nottingham since 1992 and is currently Professor of Monetary Economics and Director of the Centre for Finance and Credit Markets. He is a former Bank of England economist and has previously taught at the Economics Departments of the European University Institute, Florence and Princeton University. His research interests span monetary economics, corporate finance and central banking. Professor Mizen has been a visiting scholar to the U.S. Federal Reserve, the Deutsche Bundesbank, the European Central Bank, the Bank for International Settlements, the International Monetary Fund and a number of other central banks and universities. He is regularly consulted for his views by central banks. He has published 6 books and more than 90 articles on various aspects of monetary economics. His work has been translated into Chinese, Japanese, Korean and Spanish. He is ranked in the top 10% of economists for 29 out of 37 research quality indicators by IDEAS. Paul is the Treasurer of the Money, Macro and Finance Research Group.

Professor Mizen's complete cv can be downloaded here in pdf format. Paul's Facewall page.

Expertise Summary

My research field is monetary economics. My papers on monetary policy and monetary transmission have been published in the Economic Journal, the European Economic Review, the Journal of Money, Credit, and Banking, the Journal of Development Economics, Economica, Oxford Economic Papers, the Journal of Applied Econometrics, the Journal of Banking and Finance and many other academic journals. As the Director of the Centre for Finance and Credit Markets, I have a wide interest in matters related to monetary policy, central banking, financial markets, corporate finance, credit crunches and financial crises. I have been consulted as an expert by the United Nations, the Bank for International Settlements, the International Monetary Fund, the European Central Bank, and the UK Department of Business, Innovation and Skills.

My recent research interests are listed under the research tab (above).

Research Summary

Professor Mizen is Director of the Centre for Finance and Credit, and Macroeconomics (CFCM) and a Fellow of The Granger Centre for Time Series Econometrics. He is also a Fellow of the Centre for… read more

Current Research

Professor Mizen is Director of the Centre for Finance and Credit, and Macroeconomics (CFCM) and a Fellow of The Granger Centre for Time Series Econometrics. He is also a Fellow of the Centre for Growth and Business Cycle Research at the University of Manchester.

The following activities relate to national or international research activities.

2011 - 2013 Member and Vice-Chair - ESRC Future Research Leaders Scheme Commissioning Panel and Member and Vice-Chair - ESRC Future Research Leaders Scheme Sift Panel

2010 - Member, ESRC/HMTreasury Postdoctoral Research Fellowships Commissioning Panel.

2010 - Member, Steering group, MMF Current Issues in Macroeconomic Policy

2009 - 10 Member, ESRC Macroeconomics Capacity Building Strategy Steering Group and Assessment Panel.

2006, 2007 Invited contributor to Expert Meetings on Monetary Analysis and Interest Rate Pass Through, DG-Economics and DG-Statistics, European Central Bank

1996 - Member of Committee, Money, Macro and Finance Research Group.

1996 - 2000 Member, Centre for Economic Policy Research (CEPR) 'New Scholars' Programme

Corporate finance and monetary policy.

Trade credit. My current work on trade credit uses French data to explore the impact of diversion on the desire to offer and receive trade credit.

Bond finance. Asia has small bond markets compared to the developed countries but also in comparison to other emerging financial markets in Latin America. I am currently working with the Hong Kong Institute for Monetary Research and the Bank for International Settlements to determine whether policy initiatives by ASEAN countries that have spurred the issue of sovereign and quasi-sovereign bonds has had any impact on corporate bond issuance.

Ratings. I have a number of pieces of work on the prediction of corporate issuer default ratings using firm level data, and examining the use of market implied ratings as predictors of issuer default ratings.

Interest rate pass through by financial institutions.

My current work is examining the extent to which anticipation of future monetary policy changes affects current interest rates on deposits, loans and mortgages even when current monetary policy is static. My work uses forward rates and forecasts of future interest rates to determine the influence of anticipation on retail rate changes. The work is ongoing and will engage with the Research Department of the Banque de France.

Monetary policy when interest rates are near zero.

I continue to work on quantile estimation of the response of interest rates to inflation and output gaps during the financial crisis. I intend to consider the response of interest rates internationally as interest rates have been cut to near zero levels and have remained there.

International transmission through credit channels.

I am continuing to explore the empirical implications of open economy credit channels using Korean firm level data around the Asian crisis and for Brazil when the real devalued in 1999.

Past Research

Corporate finance and monetary policy.

Monetary economics has recognised the importance of accounting for heterogeneity of agents in models of monetary policy. In particular, when considering the effects of monetary policy through credit channels there can be substantial differences of policy for firms with different characteristics. I find that firms' access to bank and market finance when allowance is made for differences in firm-specific characteristics can result in greater (or lesser) tightening of credit when interest rates increase. An empirical evaluation of the predictions of the model is conducted on a large panel of UK manufacturing firms. We confirm that small, young and risky firms are more significantly affected by tight monetary conditions than large, old and secure firms. I have also considered other forms of finance besides bank finance.

Trade credit.

My work investigates the role of trade credit in the transmission of monetary policy. Most models of the transmission mechanism allow firms to access only financial markets or bank lending according to some net worth criterion. In my research I consider external finance from trade credit as an additional source of funding for firms that cannot obtain credit from banks. I predict that when monetary policy tightens there will be a reduction in bank lending relative to trade credit. When I separate small firms from medium and large firms, and compare the responses over tight and loose monetary policy I find that it is the small (financially weaker firms) that are excluded from bank loans and these firms resort to trade credit. This is the case even when I take into account the effects of solvency, age, credit rating, sales and demand side effects.

Bond finance.

I hypothesize that balance sheet indicators of creditworthiness could affect the external finance premium for bonds as they do for premia in for example loan markets. I find that during the period 1995-2005, among US firms issuing bonds, firms with better financial health, as measured by balance sheet indicators, face a lower external finance premium than other firms, but after separating firms into constrained and unconstrained categories using three different classification schemes I find no significant differences in premia. In another paper I examine whether firms are more likely to use bonds to finance their activities if they have reputation from strong balance sheets, a good loan history and private bond issuance. I find that reputation acquired in the public bond market makes firms 50% more likely to issue bonds.

Interest rate pass through by financial institutions.

Official interest rate changes should influence short rates on money market instruments and retail products, such as deposit accounts and mortgages, but complete pass-through is often taken for granted. My work provides a theoretical and econometric framework for assessing the evidence for this assumption using seventeen years of monthly data for rates on thirteen deposit and mortgage products offered by individual UK financial institutions. The methodology allows for asymmetries and non-linearities in adjustment and the results show that the speed of adjustment in retail rates depends on whether the perceived 'gap' between retail and base rates is widening or narrowing. Further work considers how financial institutions consider future official interest rates when setting retail rates. This work finds that future rates are very important in the determination of retail rate changes.

Monetary policy when interest rates are near zero.

My work offers a new approach that estimates the response of interest rates to inflation and the output gap at various points (quantiles) on the conditional distribution of interest rates. This offers an improvement on empirical estimates conducted only at the mean and also allows us to test the propositions that policy shows greater aggression to inflation in the reaction function in terms of a greater response coefficient as interest rates reach low levels, and increasing aggression as the lower bound is approached. We find support for the Taylor principle, a more aggressive response to inflation than under a Taylor rule, but no detectable evidence of increasing aggression as the zero lower bound is approached in the US and Japan. Due to the proximity of a zero lower bound (ZLB) on interest rates, coefficient estimates can be biased upwards. In further work on Japanese data I show the importance of measuring and correcting estimates for this bias using Japan's unique experience of prolonged low inflation/deflation.

International transmission through credit channels.

My recent work on credit channels explores whether firms that have access to international markets face different constraints when a financial crisis imposes a credit crunch. In two papers I consider firms that export and have pledgable collateral that is valuable to international lenders versus firms that have only domestic assets. The exporters ride out credit crunches more easily that firms with no hard currency assets to pledge. We confirm these findings using Korean firm level data around the Asian crisis and in a paper focused on Brazil when the real devalued in 1999.

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