Credit Growth and the Financial Crisis: A New Narrative

70 Pages Posted: 28 Aug 2017 Last revised: 12 Jun 2023

See all articles by Stefania Albanesi

Stefania Albanesi

University of Pittsburgh

Giacomo De Giorgi

University College London; NBER; Federal Reserve Banks - Federal Reserve Bank of New York

Jaromir Nosal

Boston College

Multiple version iconThere are 3 versions of this paper

Date Written: August 2017


A broadly accepted view contends that the 2007-09 financial crisis in the U.S. was caused by an expansion in the supply of credit to subprime borrowers during the 2001- 2006 credit boom, leading to the spike in defaults and foreclosures that sparked the crisis. We use a large administrative panel of credit file data to examine the evolution of household debt and defaults between 1999 and 2013. Our findings suggest an alternative narrative that challenges the large role of subprime credit in the crisis. We show that credit growth between 2001 and 2007 was concentrated in the prime segment, and debt to high risk borrowers was virtually constant for all debt categories during this period. The rise in mortgage defaults during the crisis was concentrated in the middle of the credit score distribution, and mostly attributable to real estate investors. We argue that previous analyses confounded life cycle debt demand of borrowers who were young at the start of the boom with an expansion in credit supply over that period.

Suggested Citation

Albanesi, Stefania and De Giorgi, Giacomo and Nosal, Jaromir, Credit Growth and the Financial Crisis: A New Narrative (August 2017). NBER Working Paper No. w23740, Available at SSRN:

Stefania Albanesi (Contact Author)

University of Pittsburgh ( email )

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Giacomo De Giorgi

University College London ( email )

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Federal Reserve Banks - Federal Reserve Bank of New York ( email )

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Jaromir Nosal

Boston College

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