Flu and Finances: Influenza Outbreaks and Loan Defaults in US Cities, 2004-2012.

Abstract

We examined the association between influenza outbreaks in 83 metropolitan areas and credit card and mortgage defaults, as measured in quarterly zip code-level credit data over the period of 2004 to 2012. We used ordinary least squares, fixed effects, and 2-stage least squares instrumental variables regression strategies to examine the relationship between influenza-related Google searches and 30-, 60-, and 90-day credit card and mortgage delinquency rates. We found that a proxy for influenza outbreaks is associated with a small but statistically significant increase in credit card and mortgage default rates, net of other factors. These effects are largest for 90-day defaults, suggesting that influenza outbreaks have a disproportionate impact on vulnerable borrowers who are already behind on their payments. Overall, it appears there is a relationship between exogenous health shocks (such as influenza) and credit default. The results suggest that consumer finances could benefit from policies that aim to reduce the financial shocks of illness, particularly for vulnerable borrowers.