Research Overview
I study the interactions between liquidity constraints, monopolistic competition, and search frictions in product markets, labor markets, and credit markets. Monopolistic competition is especially important for three different reasons. First, there is an externality that links the demand of firms' goods  to overall economic conditions. Second, under free entry, the product space is endogenous and influenced by policy and interacts with liquidity constraints. Third, monopolistic competition generates markups, which can augment other wedges and thereby interact with liquidity constraints.

Mario Silva

Assistant Professor
Tongji University, Department of Economics and Finance
Shanghai, China 200092

Primary Fields: Macroeconomics, Monetary Economics, Labor Economics, Household Finance

I am an assistant professor at Tongji University in Shanghai. I completed my PhD  in Economics at the University of California, Irvine, with a concentration in labor and monetary macroeconomics. My research focuses on liquidity channels (real balances and credit), aggregate demand externalities involving monopolistic competition and endogenous product variety, endogenous debt limits, unemployment, and the transmission of monetary policy.

"Unsecured Credit, Product Variety, and Unemployment DynamicsSlides

I develop a theory of the business cycle comovement of revolving credit and product variety and explore its ability to fit unemployment and other United States postwar time series. Revolving credit expanded from 1% of consumption in 1970 to 10% in 2009 and now primarily determines short-run household liquidity. It comoves positively with product variety and negatively with unemployment. I augment the Mortensen-Pissarides model with an endogenous borrowing constraint and free entry of monopolistically competitive firms. I identify financial shocks as residuals from the debt limit equation and include them alongside productivity shocks. The model reproduces stylized facts in the data and amplifies both shocks through a two-way feedback: higher debt limits encourage firm entry and raise product variety (the entry channel), and greater variety makes default more costly and thereby raises the equilibrium debt level (the consumption value channel). Moreover, compared to a counterfactual economy in which either channel is shut down, the cumulative response of unemployment to a one-standard deviation productivity or credit shock is 70-80% larger. The percentage amplification rises modestly with the size of the shock. Furthermore, only the model economy generates a procyclical response of the credit-to-consumption ratio, as observed in the data. The model with financial shocks better approximates the time series for unemployment, market tightness, and revolving credit.