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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,

No 2017-4, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: 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
Date: 2017-03-01
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