publication . Research . Article . 2017

Fracking and Mortgage Default

Kristopher S. Gerardi; Chris Cunningham; Yannan Shen;
Open Access English
  • Published: 01 Jan 2017
  • Publisher: Atlanta, GA: 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...
Subjects
free text keywords: Q51, R11, G21, mortgage default, hydraulic fracking, house prices, shale gas, ddc:330, Endogeneity, Debt, media_common.quotation_subject, media_common, Financial economics, Business, Real estate, Credit risk, Boom, Hydraulic fracturing, Monetary economics, Instrumental variable
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