Overview
Jon Faust is an economist at the Federal Reserve Board of Governors (Division of International Finance). His research focuses on the robustness of monetary policy VAR identification — specifically on how much structural conclusions depend on sharp zero restrictions. Faust (1998) demonstrated that allowing even a small contemporaneous output response dramatically expands the set of admissible variance decompositions; Faust-Swanson-Wright (2004) operationalises a high-frequency external instrument approach that partially identifies the VAR using FOMC-day futures data.
Key Contributions / Features
- Faust (1998): "The Robustness of Identified VAR Conclusions About Money." Showed that monetary policy VARs consistent with large variance shares require the funds rate to reverse sign quickly — a testable feature the data do not support; connected to the sign restriction literature.
- Faust-Swanson-Wright (2004): Developed two-step futures-based identification: (1) estimate the funds rate term structure rh from FOMC-day changes in federal funds futures; (2) impose Rα=r as identifying restrictions on the CEE 6-variable VAR. Partial identification (rank R≈3) requires Stock-Wright S-set confidence sets rather than point estimates.
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