Pennings, Steven

Person:
Pennings, Steven

Macroeconomic and Growth Team, Development Research Group

Fields of Specialization

Fiscal policy, Monetary policy, Growth, Business cycles, Macroeconomics, International economics, Development economics

External Links

Google

Departments

Macroeconomic and Growth Team, Development Research Group

Last updated: September 9, 2024

Biography

Steven Pennings is a Senior Economist in the Macroeconomics and Growth Team of the World Bank Development Research Group. His research interests include fiscal policy (especially fiscal transfers), economic growth, political economy, exchange rate pass-through, and monetary policy. He also a co-leads the World Bank’s Long Term Growth Model Project. He has published in a number of academic journals, including the American Economic Review, the Journal of International Economics and the European Economic Review. Prior to joining the World Bank, he worked at the Reserve Bank of Australia and Save the Children (Vietnam). He holds a PhD in Economics from New York University and a Bachelor of Economics (Hons.) from the Australian National University.

Full item page

Publication Search Results

Now showing 1 - 10 of 23

Long-Term Growth Prospects in Peru: Leveraging the Global Green Transition and the Reforms Needed to Become a High-Income Country
(Washington, DC: World Bank, 2024-09-09) Barco, Daniel; Celiku, Bledi; Chávez, Paulo; Mendes, Arthur; Pennings, Steven; Resk, Elena
This paper uses the World Bank Long-Term Growth Model and extensions to study Peru’s long-term growth prospects and its potential to attain high-income economy status. Under a business-as-usual baseline, Peru’s potential GDP growth declines slowly from 2.1 to 1.7 percent over the next two decades, due mostly to demographic factors. In this baseline, it takes more than half a century to reach high income status. To accelerate growth, the paper considers moderate and ambitious reform scenarios for the non-resource sector through faster total factor productivity (TFP) growth, human capital growth, and higher investment rates. The ambitious reform path accelerates growth to an average of 4.3 percent in the simulation period (2024–50), allowing Peru to reach high-income status by 2045. The paper also considers a Global Green Transition scenario, where Peru takes advantage of higher global demand for copper from clean technologies. In that scenario, higher copper prices, greater exploration, improved mining technology, and reinvested copper windfalls increase baseline growth to 3.1 percent by 2035. If Peru were able to harness the global green transition and implement ambitious reforms in the non-resource sector, growth could accelerate to an average of 5 percent, and the country could reach high-income status by 2042.
A Gender Employment Gap Index (GEGI): A Simple Measure of the Economic Gains from Closing Gender Employment Gaps, with an Application to the Pacific Islands
(Washington, DC: World Bank, 2022-02-22) Pennings, Steven Michael
Despite a policy consensus that closing gender employment gaps will boost economic growth, relatively little is known about the size of these gains in many developing countries. This paper develops a new Gender Employment Gap Index (GEGI), which is equal to the size of long-run GDP per capita gains from closing gender employment gaps. The GEGI is simple and transparent and can be easily constructed using closed-form expressions for almost all countries using macroeconomic employment rate data by gender. The basic variant of the GEGI is the gap between male and female employment as a share of total employment. The full GEGI is similar, but instead of using an aggregate employment gap, the full GEGI is the weighted average of a “better employment gap” and “other employment gap.” The basic and full GEGIs are similar (correlation of 0.97), and both average 19 percent across countries. This means that GDP per capita in the long run would be almost 20 percent higher if female employment were exogenously increased to be the same as men’s (other things being equal). The paper also provides an application for the Pacific Islands, for which a simple measure like the GEGI is particularly important given the lack of alternative estimates.
Lives, Livelihoods, and Learning: A Global Perspective on the Well-Being Impacts of the COVID-19 Pandemic
(Washington, DC: World Bank, 2024-03-22) Decerf, Benoit; Mendes, Arthur; Yonzan, Nishant; Friedman, Jed; Pennings, Steven
This study compares the magnitude of national level losses that the COVID-19 pandemic inflicted across three critical dimensions: loss of life, loss of income, and loss of learning. The well-being consequences of excess mortality are expressed in years of life lost, while those of income losses and school closures are expressed in additional years spent in poverty (measured by national poverty lines), either currently or in the future. While 2020–21 witnessed a global drop in life expectancy and the largest one-year increase in global poverty in many decades, widespread school closures may cause almost twice as large an increase in future poverty. The estimates of well-being loss for the average global citizen include a loss of 8 days of life, an additional two and half weeks spent in poverty in 2020 and 2021 (17 days), and the possibility of an additional month of life in poverty in the future due to school closures (31 days). Well-being losses are unequally distributed across countries. The typical high-income country suffered the least additional poverty years while low- and low-middle-income countries suffered far higher poverty losses with roughly the same degree of mortality shock as richer countries. Upper-middle income countries experienced the highest mortality shock of all and also high poverty costs. Aggregating total losses requires the valuation of a year of life lost vis-à-vis an additional year spent in poverty. For the wide range of valuations considered, high-income countries experienced the lowest well-being loss. Aggregate losses were much higher among lower-income countries. This is especially true for countries in the Latin America region who suffered the largest mortality costs as well as large losses in learning and sharp increases in poverty
Are Regional Fiscal Multipliers on EU Structural and Investment Fund Spending Large?: A Reassessment of the Evidence
(Washington, DC: World Bank, 2024-01-09) Fiuratti, Frederico; Nikolova, Desislava; Pennings, Steven; Schiffbauer, Marc
The European Commission’s “NextGenerationEU” COVID-19 recovery package has underscored interest in the size of regional fiscal multipliers in Europe. While the objective of these funds is the long-term transformation toward more sustainable green growth and digitalization in EU economies, several recent papers have also focused on their short-term stimulatory effects and have estimated large short-term regional multipliers on historical EU structural and investment fund spending. This has contributed to a view that EU funds can boost growth substantially not only in the long term, but also in the short term in countries receiving large flows, particularly in Central and Eastern Europe. This paper reevaluates the evidence by estimating regional short-term multipliers using recent data on EU fund spending and a leave-one-out predicted disbursement schedule instrument. In contrast with much of the recent literature, there is little evidence of large relative GDP multipliers at either the national or subnational level in the short term. This is despite a strong response of regional investment to EU funds, which often increases euro for euro. The results suggest that expectations should be tempered on using EU structural and investment funds as a tool for short-term regional fiscal stimulus, and instead policy makers may want to focus on the long-term benefits of EU funds, in line with their original purpose.
How Large Are the Economic Dividends from Closing Gender Employment Gaps in the Middle East and North Africa?
(Washington, DC: World Bank, 2024-02-20) Fiuratti, Federico Ivan; Pennings, Steven; Torres Coronado, Jesica
This paper quantifies the gains in gross domestic product per capita from closing gender employment gaps in the Middle East and North Africa, using three neoclassical growth models. The paper starts with baseline impacts from the Gender Employment Gap Index, which suggests that in the long run, gross domestic product per capita would be around 50 percent higher in the typical economy in the region if gender employment gaps were closed (mean 54 percent, median 49 percent). However, the gains are heterogeneous, ranging from less than 10 percent in Qatar to more than 80 percent in the Republic of Yemen. The paper then explores short-term gains, when capital is fixed (or adjusts slowly), and gains in the medium-term, with sluggish implementation of reforms using the Long Term Growth Model, which roughly halves the gains (and lowers the gains by more than half in resource-rich countries). Finally, the paper incorporates the effects of changes in the skill distribution in a model incorporating capital-skill complementarities in production. Because gender employment gaps in the Middle East and North Africa tend to be larger among the unskilled, closing these gaps reduces average skill levels, moderating long-term gains by 5-10 percentage points. However, if women in the Middle East and North Africa continue the current trend toward greater educational attainment, the gains will be greater than in the baseline. All three models—the Gender Employment Gap Index, the Long Term Growth Model, and capital-skill complementarities—point to large increases in gross domestic product per capita from closing gender employment gaps.
The Macroeconomic Effects of Cash Transfers: Evidence from Brazil
(World Bank, Washington, DC, 2023-12-21) Mendes, Arthur; Miyamoto, Wataru; Nguyen, Thuy Lan; Pennings, Steven; Feler, Leo
Abstract amended in January 2024: This paper provides new evidence on the macroeconomic impact of cash transfers in developing countries. Using a Bartik-style identification strategy, the paper documents that Brazil’s Bolsa Familia transfer program leads to a large and persistent increase in relative state-level GDP, formal employment, and informal employment. A state receiving 1% of GDP in extra transfers grows 2.2ppts faster in the first year, with R$100,000 of extra transfers generating five formal- equivalent jobs, half of which are informal. Consistent with a demand-side mechanism, the effects are concentrated in non-tradable sectors. However, an open-economy New Keynesian model only partially captures the high multipliers estimated.
Malaysia's Economic Growth and Transition to High Income: An Application of the World Bank Long Term Growth Model
(World Bank, Washington, DC, 2020-06) Devadas, Sharmila; Guzman, Jorge; Kim, Young Eun; Loayza, Norman; Pennings, Steven
This paper studies economic growth in Malaysia, with the purpose of assessing the potential to attain the status and characteristics of a high-income country. Future economic growth is simulated under a business-as-usual baseline, where the growth drivers follow their historical or recent trends, and under different scenarios of reform, using the World Bank Long-Term Growth Model (LTGM). Under the business-as-usual baseline, Malaysia's GDP growth is expected to decline from 4.5 to 2.0 percent over the next three decades, following the country's transition to high income in 2024 (which might be delayed due to the effects of COVID-19). This decline is partly due to demographics, but also a declining marginal product of private capital and slowing growth rates of total factor productivity and human capital. Strong reforms are required for Malaysia to grow beyond what is expected based on historical trends, especially for human capital, female labor force participation, and total factor productivity. In the strong reform scenario, based on growth drivers achieving a target corresponding to the 75th percentile of high-income countries, GDP growth is expected to have a substantially higher trajectory, reaching 3.6 percent by 2050.
Locally financed and outside financed regional fiscal multipliers
(Elsevier, 2022-04) Pennings, Steven
The size of regional fiscal multipliers determines the efficacy of fiscal stimulus, the costs of fiscal austerity and whether countercyclical fiscal policy is more effective at the federal or local level. This paper studies fiscal multipliers in regions of a monetary union—US states, Eurozone members, or countries with a hard exchange-rate peg—and how multipliers are affected by the way spending is financed: local deficit financing, local tax financing or outside financing (federal or foreign aid). I present analytical and quantitative government purchase and transfer multipliers using a New Keynesian model consistent with estimated transfer multipliers in Pennings (2021), focusing on the persistence of the fiscal shock. I find that at business-cycle frequencies, financing has little effect on impact multipliers: outside-financed multipliers are only about 0.07–0.16 larger than local deficit-financed multipliers. This suggests efforts to enable local countercyclical fiscal policy may be a partial substitute for greater fiscal centralization or foreign financing.
Assessing the Effects of Natural Resources on Long-Term Growth: An Extension of the World Bank Long Term Growth Model
(Washington, DC: World Bank, 2022-03-14) Loayza, Norman V.; Galego Mendes, Arthur; Mendez Ramos, Fabian; Pennings, Steven Michael
This paper extends the World Bank's Long-Term Growth Model (LTGM) with the addition of a natural resource sector to analyze how long-run growth evolves in resource-rich countries and the growth impacts of price shocks and resource discoveries. In the LTGM-Natural Resource Extension (LTGM-NR), commodity price shocks affect long-term economic growth through physical investment rates. As a large share of resource income typically accrues to the government, the size of the boost to investment in a price boom depends on the government’s fiscal rule. Fiscal rules that prioritize public investment, like a Hartwick Rule, generally lead to the largest increases in long-term growth. However, structural surplus rules, which save commodity revenues, can also boost growth if they free up savings for private investment. The response of growth to discoveries of natural resources is similar to the response to price shocks, although discoveries also produce a direct effect on real GDP, in addition to an indirect effect through investment. The LTGM¬-NR also captures the effect of other (non-resource) growth fundamentals in resource-rich economies, and it is better suited to general growth analysis in these countries than the standard LTGM. However, the LTGM-NR is a supply-side model, and so does not capture the short-run effects of price and discovery shocks that operate through aggregate demand.
Cross-Region Transfer Multipliers in a Monetary Union: Evidence from Social Security and Stimulus Payments
(American Economic Association, 2021-05) Pennings, Steven
US federal transfers to individuals are large, countercyclical, vary geographically, and are often credited with helping to stabilize regional economies. This paper estimates the short-run effects of these transfers using plausibly exogenous regional variation in temporary stimulus payments and permanent Social Security benefit increases. States that received larger transfers tended to grow faster contemporaneously, with a multiplier of around 1.5 for permanent transfers and 1/3 for temporary transfers. Results are broadly consistent with an open-economy New Keynesian model. At business cycle frequencies, cross-region transfer multipliers are not large, suggesting only modest gains in regional stabilization from US federal automatic stabilizers.