Steven Pennings
Research Economist
Development Research Group
The World Bank
1818 H St. NW
Washington DC 20433 USA

Fields:  Macroeconomics, International Economics, Development Economics
Curriculum Vitae: (link to CV)

Refereed Journal Publications

Pass-through of Competitors' Exchange Rates to US Import and Producer Prices
Journal of International Economics  (March 2017) [journal version (gated)]    [accepted manuscript (downloadable)]
(also World Bank Policy Research Working Paper 7926 [link to working paper] [online appendix])
        This paper shows that in theory and BLS microdata, the prices of imported goods respond to the exchange rates (ER) of the producer's foreign competitors. In contrast, standard models have no role for competitors' ERs. Excluding the effects of competitors' exchange rates typically biases upwards estimates of bilateral exchange rate pass-through because competitors' ERs and bilateral ERs are positively correlated. A multi-country version of Atkeson and Burstein's (2008) industry aggregation model is able to explain a sizable proportion of pass-through of competitors' exchange rates to import prices, and also predicts pass-through of foreign competitors' prices and pass-through of competitors' ERs to US producer prices --- both of which are supported in the data. The results suggest that pass-through will be larger for ER movements shared by a greater fraction of foreign competitor countries.

When is the Government Transfer Multiplier Large? (joint with Eric Giambattista)
European Economic Review (November 2017) [journal version (gated)] [accepted manuscript (downloadable)
(also World Bank Policy Research Working Paper 8184)  [link to working paper] [online appendix] )
        Transfers to individuals were a larger part of the 2009 US stimulus package than government purchases. Using a two-agent New Keynesian model, we show analytically that the multiplier on targeted transfers to financially constrained households is (i) larger than the purchase multiplier if the zero lower bound (ZLB) binds and (ii) is more sensitive to degree of monetary accommodation of inflation. Targeted transfers provide the same boost to demand as purchases, but lower aggregate supply relative to purchases, as those receiving transfers want to work less. When the aggregate demand curve inverts --- such as when the ZLB binds --- the extra inflation from lower supply boosts the multiplier. We show this result also holds quantitatively in a medium-scale version of the model.

The impact of monetary policy on financial markets in small open economies: more or less effective during the financial crisis? (with Arief Ramayandi and Hsiao Chink Tang) 
Journal of Macroeconomics 44 (June 2015), 60-70 [journal version (gated)]  [accepted manuscript (downloadable)] [online appendix]
        This paper estimates the impact of monetary policy on exchange rates and stock prices of eight small open economies: Australia, Canada, the Republic of Korea, New Zealand, the United Kingdom, Indonesia, Malaysia, and Thailand. On average across these countries in the full sample, a one percentage point surprise rise in official interest rates leads to a 1% appreciation of the exchange rate and a 0.5–1% fall in stock prices, with somewhat stronger effects in OECD countries than non-OECD countries (though differences are sometimes not significant). We find little robust evidence of a change in the effect of monetary policy surprises during the recent financial crisis.

Working Papers (including policy work)

Cross-region Transfers in a Monetary Union: Evidence from the US and Some Implications Latest version: Feb 2019 [link to paper] [online appendix] Reject/Resubmit at the American Economic Review
        US federal transfers to individuals are large, countercyclical, vary geographically, and are often credited for helping stabilize regional economies. This paper estimates the effects of these transfers using plausibly exogenous regional variation in recent temporary stimulus packages and earlier permanent Social Security increases. States which received larger transfers tended to grow faster contemporaneously, with larger multipliers for permanent than for temporary transfers. Results are broadly consistent with an open-economy New Keynesian model. At business-cycle frequencies, the multipliers on countercyclical cross-region transfers are closer to those for temporary transfers, suggesting only modest gains in regional stabilization from the US transfer union.

Leader Value Added: Assessing the Growth Contribution of Individual National Leaders (joint with William Easterly) Latest: May 2019 [link to paper][online appendix]
(old title "Shrinking Dictators: Assessing the Growth Contribution of Individual National Leaders" or  "How Much Do Leaders Explain Growth? An Exercise in Growth Accounting" March 2015 [link])  
        Previous literature suggests leaders matter for growth in general. This paper asks which leaders matter and develops a methodology to estimate the growth contribution of individual leaders and calculate its precision. We find few leaders have statistically significant contributions; it is difficult to know who is good for growth and who is not. We also find the most intuitive estimate of a leader’s contribution—the average growth rate during tenure—is largely useless for measuring his or her true contribution. Consequently, many significant leaders are surprises. Moreover, autocratic leaders are no more likely to be statistically significant than democratic ones.

The Seasonality of Conflict (joint with Jenny Guardado) Latest version: April 2018 [link to paper] [appendix
        This paper exploits the seasonality of agricultural labor markets to estimate the effect of changes in the returns to working on conflict intensity. Using a dynamic model of labor supply, we first show theoretically that exogenous, anticipated, and transitory changes in labor demand due to harvest are better able to capture the effects of changes in the opportunity cost of conflict relative to other shocks commonly analyzed in the literature. This is because harvest shocks hold constant other dynamic drivers of conflict which can bias empirical estimates and obscure the strength of the opportunity cost mechanism. Building on this insight, the l identification strategy exploits exogenous sub-national variation in the timing and intensity of harvest driven by local climatic conditions. Using data from several conflict settings – Afghanistan, Iraq, and Pakistan – our results show that the onset of harvest usually leads to a statistically significant reduction in the share of monthly insurgent attacks, generally those more labor intensive.

Informality, Taxation, and Gender: Evidence from Mexico (joint with Eugenia Suarez) [available upon request]
        An influential literature has argued that taxes on labor income encourage high rates of informal employment in developing countries. Despite this, there are few estimates of the size of this effect, or the mechanisms through which it works. This paper seeks to fill that gap using a rotating panel survey that captures workers' transitions in and out of informality in Mexico, and by instrumenting changes in average tax rates with changes in the statutory tax rates applied to lagged income. We find that an increase in the average tax rate leads to a significant increase in net transitions towards informality for women, but not for men. The results are driven by low-income single mothers. This is consistent with other evidence that women, especially single mothers, have higher labor market elasticities.

Consumption Smoothing and Shock Persistence: Optimal Simple Fiscal Rules for Commodity Exporters (with Arthur Mendes)
World Bank Policy Research Working Paper 8035 (April 2017) [link to working paper]

Fiscal Consolidations and Growth: Does Speed Matter? (joint with Esther Perez Ruiz), [link]
IMF Working Paper 13/230 (November 2013); Media: Businessweek 

Assessing the Effect of Public Capital on Growth: An Extension of the World Bank Long-Term Growth Model (with Sharmila Devadas) 
World Bank Policy Research Working Paper 8604 (October 2018) [link to working paper] [online appendix]
Journal of Infrastructure, Policy and Development (2019) 3(1) (reprint) [link]

Private Business Investment in Australia (joint with Lynne Cockerell) 
Reserve Bank of Australia Discussion Paper 2007-09

A long history of a short block: four centuries of development surprises on a single stretch of a New York City street (joint with William Easterly and Laura Freschi) 
Latest version: June 2016 [link]; Interactive website [link]; Media: Wall St JournalFinancial TimesMarginal Revolution, Wired

How much long-run economic growth happens at the country level? (with Diego Anzoategui and William Easterly) 
Latest version: November 2018 [link]