Economics lecturer Sigridur Benediktsdottir GRD ’05 will leave Yale to help maintain financial stability in Iceland three years after the country fell into a recession.
Benediktsdottir will still teach courses in the spring and will depart at the end of the academic year to direct the Financial Stability Department of the Central Bank of Iceland, Economics Department Chair Benjamin Polak said. Though economics professors interviewed said the department will miss her energy and expertise, they and economists outside of Yale said
Benediktsdottir is one of the most knowledgeable people about the current state of the Icelandic economy.
This will not be Benediktsdottir’s first time dealing with economic affairs in Iceland: After the nation’s three largest banks collapsed in the fall of 2008 and triggered a financial crisis, she played a prominent role in an investigative commission to identify the causes of the crash.
“She has a reputation as someone who knows a tremendous amount about these things, and who is an honest and trustworthy person,” Polak said. “She has been a huge success at Yale, and I’m sure she’ll do a fantastic job in Iceland.”
Benediktsdottir, whose research focuses on financial markets, spent her first few years out of graduate school working for the U.S. Federal Reserve, where she did research related to financial stability, colleagues said. At Yale, where she has taught since 2007 and served as associate chair of the Economics Department, she teaches “An Introduction to Macroeconomic Analysis,” a seminar for freshmen, as well as a senior seminar on global financial systems and crises.
She was called to Iceland in 2009 to serve on a parliamentary investigative commission after the nation had become an early victim of the global financial crisis.
“Iceland had become like a gigantic hedge fund and was way over-leveraged, and the crisis [in 2008] really hit them hard,” said Anthony Smith, director of undergraduate studies for the Economics Department. “[Benediktsdottir] was brought in to understand what happened, and she learned a lot in that process and became quite an expert on the financial crisis.”
The investigative commission eventually issued a report on the crash, finding that Iceland’s banks had been inadequately supervised and were allowed to take on too much risk, said Gauti Eggertsson, an Icelandic economist at the Federal Reserve Bank of New York.
In her new role at the Central Bank, Benediktsdottir will try to make sure a similar crisis does not occur again. The financial stability department that she will lead is responsible for analyzing risk in the financial system and devising precautionary rules, according to a Tuesday press release by the Central Bank.
“She’s going to be one of those watchdogs that makes sure things don’t go wrong — that the banking system that we develop now is a healthier banking system, that it doesn’t take too much risk and limits opportunistic behavior by people within the banks,” said Jon Steinsson, an associate professor of economics at Columbia University who is from Iceland.
Steinsson added that while the financial stability division of the Central Bank previously spent a lot of time on day-to-day matters of handling payments, Benediktsdottir and those working with her will focus exclusively on supervising the financial sector.
Benediktsdottir declined to comment for this article.
Faculty members and students said they will be sorry to see Benediktsdottir go. Eric Levine ’13, who took Benediktsdottir’s introductory macroeconomics seminar, described her as “full of energy” and “full of flair.” Smith said that as the associate chair for the Economics Department she has provided “invaluable” assistance organizing classes and advising.
“She’s a very dynamic, energetic person,” Smith said. “That’s why she’s been good in this leadership role in the department [at Yale], and that’s why she’ll be good in this new role.”
Benediktsdottir holds bachelor’s degrees in economics and computer science from the University of Iceland in Reykjavik.