Fracking and Mortgage Default
Christopher Cunningham (),
Kristopher Gerardi () and
Yannan Shen ()
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Yannan Shen: Clemson University, Postal: College of Business, 170 Sirrine Hall, Clemson, SC 29634, https://www.clemson.edu/business/about/profiles/YANNANS
No 2017-4, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta
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.
Keywords: mortgage default; hydraulic fracking; house prices; shale gas (search for similar items in EconPapers)
JEL-codes: G21 Q51 R11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-ene and nep-ure
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