Penn Professor to Head Bank of Israel

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By Gil Hoffman

JERUSALEM — Israeli Prime Minister Benjamin Netanyahu, who spent his formative years in Montgomery County, chose a fellow Philadelphian to become governor of the Bank of Israel on Oct. 9, when he announced the appointment of University of Pennsylvania Wharton School Professor Amir Yaron.

Speaking at a press conference at the Prime Minister’s Office alongside Israeli finance minister Moshe Kahlon, Netanyahu said it was important to him to pick the most talented candidate in the world for the job. Netanyahu praised Yaron for staying connected to Israel while living in the United States and serving as a financial officer in the Israel Defense Forces chief of staff’s office for five years.


“Professor Yaron is a professor of banking at the Wharton School of business, one of the best in the world,” Netanyahu said. “He is considered one of the world’s top experts in finance.”

Yaron, 54, has lived in the United States for 20 years, earning his doctorate at the University of Chicago and teaching at Carnegie Mellon University before coming to Philadelphia in 1997. Since then, he has taught courses at Wharton in international finance and empirical methods commonly used in finance. He was named Robert Morris Professor of Banking in 2009 and specializes in asset pricing, investments, risk-return strategies, macroeconomics and finance.

“I am thankful to the prime minister and finance minister,” Yaron said. “Over the last several weeks, I have held long, deep talks with Netanyahu and Kahlon on aspects of Israel’s economy and its achievements. We spoke about how to advance the economy, [help] Israeli society and deal with global and local challenges.”
Yaron has been a visiting scholar at the Federal Reserve Bank in Philadelphia, Bank of Israel and in Spain and Sweden.

Netanyahu pointed out that what is known as the Bansal-Yaron Model of Long Run Risks is considered one of the leading asset pricing models in the world and made Professor Yaron known in the community of international economists.

Visiting Wharton Professor and former Bank of Israel deputy governor Zvika Eckstein, who founded the Arison School of Business and Tiomkin School of Economics at the Herzliya Interdisciplinary Center, praised the appointment. Eckstein teaches a course at Wharton in teaching on central bank policy.

“Professor Yaron is an international expert in macro-monetary finance, which is the core challenge of central banks in the world and in Israel,” Ecktein said. “He has great knowledge of how to handle monetary policy and financial stability, as well as how to enhance financial efficiency. This will be particularly important in the coming years when huge changes will be made technologically that will require understainding new risks and opportunities to better integrate Israel into the new financial world.”

Yaron’s appointment will take two weeks to be completed because it must pass an oversight committee and be approved by the Israeli cabinet. If approved, he would take over next month when current governor Karnit Flug’s term ends.

The term of the Bank of Israel governor is five years. Yaron beat out former Central Bank of Argentina governor Professor Mario Blecher for the job. Netanyahu defended his preference for foreign-born candidates by saying that in Great Britain, the Bank of England has recently been run by Canadians.

It did not surprise Israelis that Netanyahu was choosing between two candidates who do not live in Israel. The governor before Flug was American professor Stanley Fischer, who was born in what is now Zambia and was vice chairman of the U.S. Federal Reserve after he returned to the United States from Israel.

Unlike Fischer, Yaron will not have to obtain Israeli citizenship to accept the job. He holds dual citizenship in Israel and the United States. Nevertheless, the appointment faced criticism in the Israeli media.

“When the time comes to fill a top economic post, Netanyahu prefers foreigners,” wrote Stella Korin Lieber in the economic newspaper Globes. “Netanyahu got along better with Stanley Fischer and [fellow American] Jacob Frenkel than [Israelis] David Klein and Karnit Flug.”

Israel’s economy was recently named the world’s third most stable by the Bloomberg financial news agency after Hong Kong and South Korea. In June, Moody’s International Credit Agency raised Israel’s credit outlook from stable to positive.

Gil Hoffman is a freelance writer.

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