Federal Reserve Bank of Atlanta
FRB Atlanta Working Paper
Fracking and Mortgage Default
This paper ﬁnds that increased hydraulic fracturing, or "fracking," along the Marcellus Formation in Pennsylvania had a signiﬁcant, negative effect on mortgage credit risk. Controlling for potential endogeneity bias by utilizing the underlying geologic properties of the land as instrumental variables for fracking activity, we ﬁnd that mortgages originated before the 2007 boom in shale gas, were, post-boom, signiﬁcantly less likely to default in areas with greater drilling activity. The weight of evidence suggests that the greatest beneﬁt from fracking came from strengthening the labor market, consistent with the double trigger hypothesis of mortgage default. The results also suggest that increased fracking activity raised house prices at the county level.
Cite this item
Chris Cunningham & Kristopher S. Gerardi & Yannan Shen, Fracking and Mortgage Default, Federal Reserve Bank of Atlanta, FRB Atlanta Working Paper 2017-4, 01 Mar 2017.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
- R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
Keywords: mortgage default; hydraulic fracking; house prices; shale gas
This item with handle RePEc:fip:fedawp:2017-04
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