Household Debt and Macroeconomic Fluctuations

VoxEU

US Congressional committees are now grilling bankers on the complex instruments that provided subprime mortgages with a veil of security. This column presents new evidence that subprime mortgages had more serious consequences – they were a key factor in the US housing-price boom. When house prices faltered, subprime mortgage holders defaulted en masse, eventually leading to the global crisis.

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