The Federal Reserve Bank of Minneapolis has begun a formal search for a new president after Narayana Kocherlakota announced he would join the economics faculty at the University of Rochester in New York state on Jan. 1, 2016.

Kocherlakota, the Minneapolis Fed's current president, announced in late 2014 that he would step down when his term ends in early 2016.

During his tenure at the Fed, Kocherlakota emphasized regional outreach and monetary policy transparency and presided over a high-profile shake-up at the Minneapolis Fed's research division.

Kocherlakota's return to teaching and research is no surprise, since he previously held professorships at Northwestern University, the University of Iowa and Stanford University. He also served as chairman of the economics department at the University of Minnesota.

"This is a fabulous appointment," University of Rochester President Joel Seligman said. "Narayana was an extraordinarily distinguished professor at Stanford and Minnesota and has made a significant mark as president of the Minneapolis Fed. His scholarship and drive can only further elevate our Department of Economics."

Kocherlakota said in a statement that he was honored to join the university and to have been selected for its newly endowed Lionel W. McKenzie professorship. McKenzie established University of Rochester's doctoral program in economics.

"The university has a long, rich academic history with eight Nobel Prize winners among its faculty and alumni, and I am excited to become a member of such a distinguished institution," he said.

Before his appointment to the Minneapolis Fed, Kocherlakota served as a member of its research staff, as well as a research consultant for the bank. The district encompasses Michigan's Upper Peninsula, northern Wisconsin, Minnesota, North Dakota, South Dakota and Montana.

Randy Hogan, chairman of the Minneapolis Fed's board of directors, expressed his appreciation for Kocherlakota's service and "for his visionary leadership and great contributions to the Bank and to the Federal Reserve System."

Hogan said the Minneapolis Fed has hired the firm Spencer Stuart to help with the search for a new president. The six-person search committee includes directors Hogan and MayKao Hang as its co-chairs.

The bank posted a detailed job description, an unusual step in what is often a closely guarded and sometimes insular process.

Kocherlakota will be the third of the Fed's 12 regional bank presidents to leave this year, a critical time as the Fed debates when and how fast to raise interest rates it has kept near zero since 2008.

The two others, Dallas Fed chief Richard Fisher and Philadelphia Fed chief Charles Plosser (a former dean of the University of Rochester business school), were among the Fed's most hawkish policymakers. They both retired in March.

Patrick Harker, a director on the Philadelphia Fed's board, starts as the bank's president next month.

Reuters contributed to this report.

Tom Meersman • 612-673-7388