Econ professor receives special appointment at the Fed

The Federal Reserve Board recently appointed Hopkins Professor Jon Faust as a special adviser in the Office of Board Members. He assumed his post on Jan. 17.

Faust serves as the Louis J. Maccini Professor of Economics in the Krieger School of Arts and Sciences as well as the director of the Center for Financial Economics.

"The appointment is an enormous honor for Johns Hopkins and the Economics department. Prof. Faust is being appointed to a very senior position as special advisor to the Chairman of the Fed. This comes at a time of global turmoil not seen since the 1930s," Acting Director of the Center for Financial Economics, Professor Jonathan Wright, said.

Prior to joining the Hopkins community in 2006, Faust served in the Federal Reserve as assistant director of the Division of International Finance for nearly two decades.

"I am very pleased to be able to serve the Fed and the country in these remarkable and difficult times. When I left the Fed for Johns Hopkins, I never expected to go back on any basis except, perhaps, to give an academic seminar.

"When I was asked to come back as a Special Adviser, a friend reminded me of the daunting issues and said, ‘if not now, when?' That pretty much crystallized it for me and my wife and family," Faust said.

Faust earned a Ph.D in economics from the University of California, Berkeley, an M.Phil in economics from Oxford University and a bachelor's degree in economics from the University of Iowa.

"The global financial crisis caught the economics profession by surprise and must eventually lead to a fundamental rethink of the paradigm for macroeconomics and finance. In some ways, this is about rediscovering lessons from the Great Depression, but re-applying them to our time. Researchers in the Johns Hopkins Economics department and its Center for Financial Economics are at the forefront of these developments, as is evidenced by Professor Faust's appointment," Wright said.

Faust's position as a special adviser will involve contributing to the monetary policy process, in which he will work with Andrew Levin, who is also a special adviser. He will also be a part of the Federal Open Market Committee's subcommittee on communications. Furthermore, Faust will also work very closely with Steven Kamin, the director of the Division of International Finance, and the Division's staff in analyzing important international issues. Faust will also assist the Board with various special projects.

"Steve and the whole International Finance team are great. I spent about 15 years in the International Finance Division, and I either worked for or with most of the current leadership in the Division. I look forward to working with them again," Faust said.

The subcommittee Faust will join was involved in creating a solution to a problem posed by the Federal Open Market Committee (FOMC) on the need for greater communication about the FOMC's long term economic goals and policies to improve their effectiveness. The solution was to incorporate information about participants' projections of future monetary policy into the Summary of Economic Projections, released four times a year. Faust will have the opportunity to continue enhancing communication and coming up with other solutions to various problems in this subcommittee.

"Professor Faust was appointed to this position because he is simultaneously at the cutting edge of scholarly research, but also has great practical experience and insights. While on leave from Hopkins, he will be right at the heart of the policy process and will be attending meetings of the Federal Open Market Committee (FOMC) and discussing strategy with Ben Bernanke and other members of that committee," Wright said.

Professor Faust has been given a two-year "public service" leave of absence, given only to faulty who have been asked by government institutions for their expertise. Dean Newman, the James B. Knapp Dean of the Krieger School of Arts and Sciences gave Faust the leave of absence.

"Jon has an exceptional breadth of expertise in international economics, monetary economics, finance and econometrics, along with nearly two decades of prior experience in the Federal Reserve System," Federal Reserve Chairman Ben S. Bernanke said in the Fed's news release.

While Faust is leaving Hopkins for two years, two co-directors, Robert Barbera and Jonathan Wright, have been selected to the Center for Financial Economics. Barbera is the chief economist at Mount Lucas Management in New York and a fellow at the Center for Financial Economics. Wright is also an esteemed economist, having served at the Federal Reserve Board in Washington for nine years.

"The decision to return to the Federal Reserve was difficult mainly because the leave will involve some hardships for my family, for the faculty and students of the Department of Economics and for the Center for Financial Economics. Of these, I was most concerned about the CFE, because it is relatively new and just gaining real momentum.  We worked closely with Dean Katherine Newman, with the wonderful supporters of the CFE, and with my colleagues in the Economics Department to make sure that the CFE stays on its strong upward trajectory. Jonathan Wright and Bob Barbera, in particular, have stepped up to lead the CFE, and I know they'll make it an exciting time for the CFE and its students," Faust said.