Research Overview
 My research can be distilled into four interrelated themes. The first is the link between liquidity, payment capacity, and effective demand. Here the question is how liquidity constraints (debt, liquid assets) affect the payment capacity of individuals and hence the aggregate demand in the economy. This link arises from the portfolio choice of real balances in "New Monetarism with Endogenous Product Variety and Monopolistic Competition" and from the household debt limits in my job market paper "Unsecured Credit, Product Variety, and Unemployment over the Business Cycle."

 Second, at the heart of my job market paper is mutual feedback between debt limits and product variety, which generates empirically sizable amplification from common model ingredients (limited commitment, taste for variety, free entry). The third theme is the recurring use of monopolistic competition, which directly accounts for imperfect substitutability of goods and markups, price setting by firms, and is a natural setting for studying product variety and technological linkages among firms. 

Fourth, I examine the role of monetary policy. In "New Monetarism with Endogenous Product Variety and Monopolistic Competition," I show that inflation can reduce markups with variable elasticity of demand. This channel reduces the measure of firms and increases their size, reducing average costs and potentially improving welfare. In "Corporate Finance, Monetary Policy, and Aggregate Demand," I examine how aggregate demand externalities from monopolistic competition  amplify financial frictions, and the role of heterogeneity in which financial bottlenecks to some firms adversely affect the demand for other firms. In joint work with Tai-Wei Hu, Guillaume Rocheteau, and Ayushi Bajaj, we show that constrained efficient allocations in a Lagos-Wright (2005) can be decentralized with indivisible money and take-it-or-leave-it offers, or alternatively with divisible money and a regressive transfer scheme financed by money creation.
 Mario Silva

PhD Student
Department of Economics
3151 Social Science Plaza
University of California-Irvine
Irvine, CA 92697-5100

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

I am an assistant professor at Tongji University in Shanghai, China. 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.

Job Market Paper

"Unsecured Credit, Product Variety, and Unemployment Dynamics"

Abstract: Unsecured credit has grown from a negligible amount before 1970 to over 10% as of 2010,  there is a strong negative correlation between unemployment rate and credit, and there is a positive relationship between net product variety and unsecured credit. Motivated by these facts, I introduce endogenous borrowing constraints and taste for variety in a Mortensen-Pissarides labor search model. These ingredients jointly imply positive mutual feedback between debt limits and product variety: greater debt limits encourage firm entry and raise product variety (the entry channel), and more varieties increase the opportunity cost of default and thus raise the equilibrium debt level (the consumption value channel). This mechanism amplifies credit and productivity shocks, increasing the volatility of unemployment, debt-to-consumption, and product variety.  I highlight these channels in two experiments: the first compares two economies with high-vs.low- product differentiation, and the second compares a free entry economy to one with a fixed mass of sellers.