  This paper provides the first causal evidence that credit supply expansion
caused the 1999-2010 U.S. business cycle mainly through the channel of
household leverage (debt-to-income ratio). Specifically, induced by net export
growth, credit expansion in private-label mortgages, rather than
government-sponsored enterprise mortgages, causes a much stronger boom and bust
cycle in household leverage in the high net-export-growth areas. In addition,
such a stronger household leverage cycle creates a stronger boom and bust cycle
in the local economy, including housing prices, residential construction
investment, and house-related employment. Thus, our results are consistent with
the credit-driven household demand channel (Mian and Sufi, 2018). Further, we
show multiple pieces of evidence against the corporate channel, which is
emphasized by other business cycle theories (hypotheses).
