Dr. Prachi Mishra

We look at the effects of debt and primary fiscal balances on sovereign credit ratings through the lens of a simple model. We find that the ratings differ from the implications of the model in three important ways. They give much more weight to debt relative to forecast primary balances. They understate the effects of the difference between the interest rate and the growth rate. They give a very large role to country effects. For the same level of debt and forecast primary balances, they imply extremely different ratings across countries, and imply extremely different levels of debt needed to reach a given rating.

We study how U.S. monetary policy shocks transmit to cross-border merger and acquisition (M&A) activity. Using country- and firm-level data, tighter U.S. policy is shown to reduce both the value and the number of cross-border deals. The effects are especially pronounced for acquirer firms with larger foreign-currency liabilities, consistent with a net worth channel. Reflecting agency motives for acquisitions, deals announced under more accommodative U.S. conditions underperform ex post, indicating potential capital misallocation.

Electoral timing coordination represents a fundamental institutional choice with potentially significant macroeconomic consequences, yet systematic evidence remains limited. This paper exploits variation in India's multi-level electoral system to identify causal effects of synchronized elections on economic growth. Our findings can inform ongoing debates about India's proposed electoral reforms, and are also relevant for broader international debates on political economy determinants of growth in emerging markets and benefits from political unions, specifically, in the case of Europe.

Why did US inflation rise over 2021-22 and why has it retreated since then? Ball, Leigh, and Mishra (2022), writing near the inflation peak, explained the rise with a framework in which inflation depends on three factors: long-term expectations; the tightness of the labor market as measured by the vacancy-to-unemployment (V/U) ratio; and large changes in relative prices in particular industries such as energy and autos. This paper finds that the same framework explains the retreat in inflation since our earlier work.

We study a bank run in India in which private bank branches experience sudden and considerable loss of deposits, which migrate to state-owned public sector banks (PSBs) that serve as safe havens. We trace the consequences of the deposit reallocation using bank branch-level balance sheet and firm-bank lending data. The flight to safety is not a flight to quality. Lending shrinks and credit quality improves in run banks, but worsens in PSBs receiving the flight-to-safety flows. The reallocation of resources is not efficient in the aggregate.

U.S. inflation surged in 2021-22 and has since declined, driven largely by a sharp drop in goods inflation, though services inflation remains elevated. This paper zooms into services inflation, using proprietary microdata on wages to examine its relation-ship with service sector wage growth at the Metropolitan Statistical Area (MSA) level. We estimate the wage-price pass-through with a local projection instrumental variable model that exploits variation in labor market tightness across MSAs. Our findings re-veal a positive and significant relationship between wages and price growth, with a lag. This suggests that the effects of tight labor markets are persistent and may influence the pace of progression toward the inflation target.