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

Cross-region transfers in a monetary union: Evidence from the US and implications for Europe Latest version: Dec 2017 [link to paper] [online appendix] Reject/Resubmit at the American Economic Review
        Federal transfers to individuals are countercyclical, vary greatly across US states, and are often given credit 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. I find that states receiving larger transfers tend to grow faster contemporaneously, with greater multipliers for permanent transfers. Results are consistent with an open-economy New Keynesian model. Despite this, a counterfactual “transfer union” in Europe (which currently lacks equivalent cross-country transfers) only generates modest gains in regional stabilization, especially when compared with locally-financed countercyclical transfers.

Too Busy to Fight? Harvest and the Seasonality of Conflict (joint with Jenny Guardado) Latest version: July 2017 [link to paper] [appendix] (old title: The Seasonality of Conflict)
        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. Our empirical 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.

Shrinking Dictators: how much economic growth can we attribute to national leaders? (joint with William Easterly) Latest: April 2018 [link]
(previous title "How Much Do Leaders Explain Growth? An Exercise in Growth Accounting" March 2015 [link]) 
        National leaders – especially autocratic ones - are often given credit for high average rates of economic growth while they are in office (and draw criticism for poor growth rates). Drawing on the literature assessing the performance of schoolteachers and a simple variance components model, we develop a new methodology to produce optimal (least squares) estimates of each leader’s contribution to economic growth (correcting for noise, country effects and observables), and we calculate the precision of those estimates. We find that (i) only a small fraction of leaders has a statistically significant positive or negative growth contribution: for the vast majority, we can’t separate their contribution from zero; (ii) the average growth rate during a leader’s tenure is a [forecast] biased and inaccurate measure of their true growth contribution and for the majority disregarding their growth performance and assuming a zero effect is more accurate; (iii) democratic leaders (not autocratic leaders) are overrepresented in the set of significantly good or bad leaders, largely due to less noisy growth outcomes and (iv) while we do sometimes find sizable growth contributions of celebrated “benevolent autocrats”, we also find that they are regularly outranked by other less celebrated leaders. Combined, the results cast doubt on our ability to identify good and bad leaders – especially autocratic ones – based on their growth performance.

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 

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) 
Work in progress Latest version: February 2016 [link]

Informality and Taxes in Mexico (joint with Eugenia Suarez)
Work in progress.