During the 1999-2019 U.S. housing cycle, three empirical facts present a puzzle: in the boom period, the correlation between income growth and mortgage growth is (1) negative across ZIP codes within a metropolitan area, but (2) positive across metropolitan areas, and (3) the metropolitan areas that experience the worst bust also show the strongest recovery. I develop a unified credit expansion theory that explains both within- and cross-metro patterns in the prior, boom, bust, and recovery periods (including the three facts above) and generates new testable implications of “double differences" (cross ZIP codes and cross metros) for the four periods. Following the idea of “Economic Base Theory", I construct local economic exposure to net export growth as the driving force of local economy and credit expansion. For the identification strategy, I use a new instrumental variable approach from the International trade literature for the following empirical results. First, I show that high-net-export-growth metros experience a stronger boom-bust-recovery housing cycle due to credit expansion in private-label (non-jumbo) mortgages (PLNJMs), rather than in government-sponsored enterprise mortgages (GSEMs), because only the former can legally respond to local economic conditions. Second, for the “double differences", I define a low-minus-high (LMH) factor as the private-label (non-jumbo) mortgage (and house price) growth in low-income ZIP codes minus that in high-income ZIP codes within the same metropolitan area. I show that this low-minus-high factor in the high-net-export-growth metros is more positive during the boom period, more negative during the bust period, and slightly more positive in the recovery period than in the low-net-export-growth metros. Lastly, I employ five tests to demonstrate that “speculation" is unlikely to play a dominant role in this housing cycle. 

Presentation: ASU PhD Seminar, ASU Browbag,  2024 Eastern Finance Association, Georgia Institute of Technology, 2024 Econ Graduate Students' Conference at WashU, 2025 Financial Management Association Annual Conference, 2025 Southern Finance Association Annual Conference, 2026 Southwestern Finance Association Annual Conference (planed).

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 (non-jumbo) mortgages causes a more pronounced boom (2000-2006) and bust (2007-2010) cycle in house-related industries in high-net-export-growth metros than in low-net-export-growth metros. Thus, our results are consistent with the credit-driven household demand hypothesis. Most importantly, our unique research design enables us to conduct the most comprehensive tests on theories (hypotheses) regarding the business cycle. We show that the following theories (hypotheses) cannot explain 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. 

Presentation: 2026 American Economic Association Annual Conference

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 in government-sponsored enterprise mortgages, causes a more pronounced boom (1999-2005) and bust (2008-2014) cycle in household leverage in high-net-export-growth metropolitan areas than in low-net-export-growth ones. In addition, 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). Furthermore, we present multiple pieces of evidence against the corporate channel, as emphasized by other business cycle theories (hypotheses). 

Presentation: ASU Ph.D. Seminar, Georgia Institute of Technology, 2024 Financial Management Association Annual Meeting

This paper establishes the causality between export growth and increased corporate innovation in quantity and quality in US public firms by using a novel gravity model-based instrument from international economics. Strong empirical evidence shows up in various measures of innovation, including the number of patents, number of citations, scaled number of citations, and average number of citations. In addition, this paper uncovers three mechanisms through which export increases firm innovation: (1) export growth increases sales and Research & Development; (2) export growth induces experienced inventors to reallocate towards industries with more export growth and new-generation inventors to start their careers in these industries; (3) export growth also increase institutional ownership percentage and concentration in these industries, which have been shown to increase innovation via reducing career risk faced by managers. 

Traditional business cycle theories focus on either (1) the banks’ amplification role in the business downturn or (2) the banks’ passive role in the business cycle via the corporate investment cycle. This paper shows two crucial departures. First, we demonstrate that banks proactively expand excessive credit through mortgages, credit cards, auto loans, and securitization, creating an economic boom. Second, we show that banks’ proactive credit expansion for household consumption, rather than for corporate investment, contributed to the Great Recession. To achieve causal evidence, my difference-in-difference strategy explores (1) exogenous timing of the invention of the Copula formula (the key technology in financial securitization), and (2) geographic differences in exposure to net export growth. Consistent with my new credit expansion theory, I show that after the invention of the Copula formula, banks in metropolitan areas with higher net export growth proactively expand more credits, resulting in booms in household consumption and related housing and nontradable sectors. Ultimately, the bust is more severe in these metropolitan areas, as evidenced by bank losses, household bankruptcy, and contraction in housing and nontradable sectors.