From the window of his office in the refurbished Riddel Hall, site of the newly-opened Queen’s Postgraduate and Executive Education Centre, Michael Moore has a commanding view right across Belfast to Parliament Buildings at Stormont. But his professional horizons stretch a lot further.
He is the University’s Professor of Finance. His field is international economics and he has extensive experience both inside academia and out, including periods spent with the Central Bank of Ireland and the Irish investment body, the IDA. His current research focus is on European sovereign bonds. He is mid-way through a three-year project, funded by the Economic and Social Research Council, examining dealer behaviour in that market.
‘This particular piece of research began with the question – under what circumstances would bond markets break down? As you can imagine, it’s very relevant because that’s exactly what occured.
‘We were concerned because we found a peculiar feature in the data which was that customers seemed to get a much better deal from dealers than dealers gave each other. Customers got better spreads. We had to develop a model to try to explain this. One of its predictions was that if this type of issue became very acute, then the market would break down completely – and that’s what did happen.’
As he explains, ‘The euro is the world’s largest bond market, and it’s in crisis because many people would not accept the bonds of individual countries, and so the entire euro system has been put at risk.’
He has clear views on the issues. ‘The design flaw in the euro was that banking supervision and regulation was left to the national central banks instead of being brought in with the rest of the European Central Bank functions. When a bank is in great difficulties, the national central bank which is responsible for it has no means to actually rescue it other than to go to the"We’ve identified a new concept – order flow – which the central banks are very excited about." Treasury and ask for money. We need centralised banking supervision, centralised deposit insurance and centralised bank resolution. Then when banks get into difficulties that rescue has to be funded by printing money. That element is completely missing.
‘There is a belief that what we have in Europe is a sovereign bond crisis. We don’t. We have a banking crisis. Ireland had the most secure public finances in the western world in 2007 and now it’s bankrupt. What happened was that many of the banks went insolvent and had to be rescued and the public debt shot to unsustainable levels. This was a banking crisis that became a sovereign debt crisis and the conventional means of printing money wasn’t available.’
Professor Moore works closely with a group of international academics and a large number of major central banks, including the European Central Bank, the Federal Reserve and the Bank of Canada. They are turning their attention to the question of how to forecast exchange rates.
‘This is a real puzzle, one of the biggest in finance. In general the current methods of forecasting aren’t good but we’ve identified a new concept – order flow – which the central banks are very excited about.’ A consortium has been formed for the purpose, involving researchers and central banks.
And there is Riddel Hall. He is excited about the work that will be carried out there. ‘We see ourselves as providing very high quality executive education. Finance is one of the key areas in the Queen’s University Management School and with the support of First Derivatives and Invest NI, we have a mock trading room where our students can come in and experience the trading environment directly. First Derivatives are also using it for their own training purposes.
‘My area is international finance but we also have groups working on financial institutions and financial history. That is very important because the sort of things we’re seeing now have happened before. So we need to look at how we got ourselves into a particular situation – but, more importantly, how we managed to solve these problems in the past.’
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