Amir Yaron
Amir Yaron | |
|---|---|
| Born | 1964 Israel |
| Occupation(s) | Economist, Governor of the Bank of Israel, Professor |
| Years active | 1994–present |
| Known for | Governor of the Bank of Israel; research in asset pricing and macroeconomics; Stephen A. Ross Prize recipient |
Amir Yaron (; born 1964) is an economist holding dual Israeli-American citizenship and currently serves as the Governor of the Bank of Israel. Prior to this appointment, he was a Professor specializing in Banking and Finance at the Wharton School of the University of Pennsylvania.
Early life
Yaron was born in Israel in 1964 and spent his childhood in the cities of Ramat Hasharon and Ramat Gan. His father, Yaakov, initially worked as an economist at Bank Hapoalim before advancing to senior management positions within Israeli industry. Subsequently, he joined the World Bank, focusing on emerging markets, which led the family to relocate to the United States. Yaron’s mother was professionally engaged as both a teacher and a psychologist.
Between 1985 and 1989, Yaron served as an officer in the Israel Defense Forces, working under the economic advisor to the IDF Chief of Staff, and concluded his military service with the rank of captain. He completed his undergraduate and graduate studies in economics at Tel Aviv University, earning a master’s degree with distinction in 1989. He then pursued further graduate education at the University of Chicago, where he obtained a second master’s degree in 1992 and a Ph.D. in 1994 under the supervision of Nobel Laureate Lars Peter Hansen.
Academic career
Yaron’s academic journey began as an assistant professor in economics and finance at Carnegie Mellon University from 1994 to 1997. He joined the faculty at the Wharton School in 1997, advancing to associate professor by 2004 and later being named Robert Morris Professor of Banking and Finance in 2009. His scholarly work encompasses asset pricing, investment strategies, finance, international markets, and macroeconomic theory. Additionally, he led the capital markets research group at the National Bureau of Economic Research (NBER) and held a visiting scholar position at the Federal Reserve Bank of Philadelphia.
Economic achievements
As a researcher in financial economics, Yaron has concentrated on areas such as microfinancing, asset valuation, and investment management. His extensive publications appear in leading journals within economics and finance, complemented by lectures on topics including international investment and multinational corporations.
On October 28, 2019, Yaron was honored with the Stephen A. Ross Prize awarded by the Foundation for the Advancement of Research in Financial Economics (FARFE) for his contributions to asset pricing theory. The accolade recognized a seminal 2004 paper co-authored with Prof. Ravi Bansal published in The Journal of Finance, which tackled the "Excess Equity Yield Puzzle." Their research elucidated why equities tend to produce higher returns over multiple years compared to bonds, attributing this phenomenon to evolving perceptions of long-term macroeconomic risks and economic uncertainty reflected in changing equity and bond yields.
The prize committee emphasized that this work is foundational for both asset pricing models and macroeconomic analysis, offering valuable understanding of factors influencing public savings behavior and consumption patterns during global challenges such as trade wars, shifts in political policies, and climate change concerns. The Bansal-Yaron framework has been extensively cited across academic literature, including recognition by the Nobel Prize Committee in 2013 for its influence on research by Nobel laureate Lars Peter Hansen.
Beyond his contributions to asset pricing, Yaron has advanced macroeconomic research addressing diverse consumer groups and firms. His work explores issues related to inequality, consumer decision-making, human capital development, unemployment dynamics, income potential, and social welfare systems.
Although new to Israel’s monetary policy arena upon his appointment, Yaron was selected as Governor of the Bank of Israel owing to his deep expertise in finance and understanding of macroeconomic risks that impact financial stability.
Bank of Israel Governor
On October 9, 2018, Prime Minister Benjamin Netanyahu appointed Prof. Amir Yaron as the governor of the Bank of Israel, succeeding Karnit Flug. He officially took office on December 24, 2018, following an interim period during which Nadine Baudot-Trajtenberg served as acting governor.
Upon assuming his role, Yaron identified the normalization of monetary policy as a central priority and underscored the significance of interest rates as the main instrument for steering the economy. He stressed the importance of substantial investments in infrastructure and human capital to unlock Israel’s growth potential and advocated for financial innovation to enhance competition within the country’s banking sector.
On January 7, 2019, Yaron declared that the interest rate would remain steady at 0.25%, after it had been previously raised from 0.1%. The Bank indicated a plan for a gradual increase in rates over a two-year horizon aimed at stabilizing inflation. By June 2019, Yaron expressed concerns over rising budget deficits and deteriorating debt-to-GDP ratios, signaling possible tax hikes and the elimination of certain exemptions.
In August 2019, the Bank released a report addressing Israel’s relatively low labor productivity compared to OECD nations. The report recommended reforms spanning education, regulatory frameworks, infrastructure development, and vocational training specifically targeting Haredi men. It projected that an investment of NIS 42 billion in these areas could generate long-term gains amounting to NIS 270 billion. By September 2019, Yaron assigned the Research Department to formulate recommendations concerning the housing market alongside defining strategic objectives.
Throughout his first year in office, Yaron maintained stable interest rates despite market expectations for cuts and described the Bank’s foreign exchange approach as “constructive ambiguity,” deeming it appropriate for Israel’s small-scale economy.
At the onset of the COVID-19 pandemic, Yaron spearheaded unprecedented monetary measures beyond merely reducing rates to 0.1%. These included liquidity injections into bond markets, dollar/shekel swap operations, targeted lending programs for small businesses, and purchases of government and corporate bonds. The Bank encouraged commercial banks to balance ongoing credit provision with the challenges posed by the crisis and facilitated loan repayment deferrals for affected borrowers.
Among regulatory responses was a reduction of commercial banks’ capital requirements by one percentage point to improve credit availability amid heightened demand. As an economic advisor, Yaron supported substantial fiscal stimulus efforts despite increasing deficits to aid businesses and preserve employment through governmental safety nets.
Following the establishment of Israel’s 36th government in May 2021, the Bank proposed a strategic agenda emphasizing human capital enhancement, infrastructure investments, expansion of financial markets, and modernization plus regulation of the public sector through digitization.
Yaron focused on narrowing Israel’s gap in advanced payment systems; under his leadership, EMV standards were implemented alongside the introduction of ApplePay and greater adoption of digital wallets.
In response to rising inflation during 2022, the Bank raised interest rates several times—most notably by 0.75 percentage points in August reaching 2%. Commercial banks fully passed these increases onto consumer loan rates but only moderately raised deposit rates. Additionally, in August 2022, mortgage reforms were introduced requiring lenders to provide standardized offers for greater consumer transparency.
During discussions surrounding the Levin Judicial Reform, Yaron voiced criticism about its possible effects on institutional independence and condemned its expedited enactment without broad public agreement.
After hostilities began with the Gaza war on October 7, 2023, the Bank implemented measures aimed at economic stabilization including up to $30 billion in foreign currency sales and coordinated deferments on loans and mortgages for affected citizens and reservists. Yaron also represented Israel at international economic summits alongside figures such as Federal Reserve Chair Jerome Powell and ECB President Christine Lagarde.
On November 20, 2023, Prime Minister Netanyahu and Finance Minister Bezalel Smotrich consented to extend Yaron’s term by an additional five years; this extension received cabinet approval on November 27.
In January 2024, Yaron reduced interest rates by 0.25% to 4.5%, marking the first cut since April 2020 when rates reached historic lows amid the pandemic. Prior to this reduction, rates had steadily increased from April 2022 due to inflationary pressures until peaking at 4.75% in May 2023.
Remarks on judicial reform during tenure as Governor of the Bank of Israel
Throughout the debates surrounding judicial reform, Yaron, in his capacity as Governor of the Bank of Israel, persistently cautioned against implementing legislative changes unilaterally, underscoring the possible adverse effects on Israel’s economic stability without achieving broad-based agreement. He emerged as a prominent voice in the discussion, stressing that significant legal modifications must not compromise the autonomy of institutions or move forward absent comprehensive political backing.
Yaron consistently voiced his apprehensions during interviews with both domestic and international press, as well as at Bank of Israel briefings. He alerted that if the public perceives these legislative alterations as permanent, it could inflict economic harm averaging approximately 2.8% of GDP annually over a three-year span. His stance opposing the reform initiative, coupled with interest rate increases under his governance, attracted criticism from coalition representatives.
Personal background
Amir Yaron resided in the United States from the 1990s until his return to Israel in 2018. He is married and has two children. His extended period living abroad generated discussion regarding his suitability for appointment, with some expressing reservations while others considered it beneficial for strengthening connections with Israelis living overseas.
Additional roles
- International Monetary Fund (IMF), Ex-Officio Member of the Board of Governors (since 2018)
- Board Member at the Aaron Dovrat Institute for Economic Policy, Herzliya Interdisciplinary Center
- Member of the Foundation for the Advancement of Research in Financial Economics
Selected publications
- 2001 Eduardo Jallath, Tridas Mukhopadhyay, Sandra Slaughter and Amir Yaron: "The Economic Value of Network Externalities In an Electronic Payment Network: An Empirical Evaluation"
- 2001 Ravi Bansal and Amir Yaron: "Growth Rate Dynamics and the Cost of Economic Fluctuations"
- 2004 Ravi Bansal and Amir Yaron: "Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles"