  Empirical business cycle studies using cross-country data usually cannot
achieve causal relationships while within-country studies mostly focus on the
bust period. We provide the first causal investigation into the boom period of
the 1999-2010 U.S. cross-metropolitan business cycle. Using a novel research
design, we show that credit expansion in private-label mortgages causes a
differentially stronger boom (2000-2006) and bust (2007-2010) cycle in the
house-related industries in the high net-export-growth areas. Most importantly,
our unique research design enables us to perform the most comprehensive tests
on theories (hypotheses) regarding the business cycle. We show that the
following theories (hypotheses) cannot explain the cause of the 1999-2010 U.S.
business cycle: the speculative euphoria hypothesis, the real business cycle
theory, the collateral-driven credit cycle theory, the business uncertainty
theory, and the extrapolative expectation theory.
