Question

Go to the St. Louis Federal Reserve FRED database and find data on net worth of households (TNWBSHNO) and the net percentage of domestic banks tightening standards for auto loans (STDSAUTO). Adjust the units setting for the net worth indicator to “Percent Change from Year Ago,” and download the data into a spreadsheet.

a. Calculate the average, over the most recent four quarters and the four quarters prior to that, for the bank standards indicator and the “percent change in net worth” indicator. Do these averages behave as you would expect?

b. Use the Data Analysis tool in Excel to calculate the correlation coefficient for the two data series from 2011:Q2 to the most recent quarter of data available. What can you conclude about the relationship between the net worth of households and bank auto lending standards? Is this result consistent with efforts to reduce asymmetric information?

Short answer

a. Normal rate change in total assets of late four quarters has expanded while bank standard marker has diminished when contrasted with the earlier quarters.

b. The coefficient of connection is -0.2 .

Step-by-step solution

Content Introduction

Total assets alludes to the aggregate sum of the capital of the business. Bank indicators screens the presentation of the business.

Explanation (Part a)

The average of recent four quarters and past quarters of rate change in total assets and bank principles indicators.

Table addresses the average of recent four quarters and past quarters of rate change in total assets and bank principles indicator.

Average percentage change in total assets of late four quarters has expanded while bank standard indicator has diminished when contrasted with the earlier quarters. Subsequently, these indicators act in inverse directions which were inverse to assumptions.

explanation (Part b)

Coefficient of connection is a factual apparatus used to decide the strength of relationship shared by the two factors. The coefficient of connection and whether it decreases the issue of unbalanced data.

Along these lines the coefficient of connection is $-0.2$. The connection between the series is negative and it expands the issue of unbalanced data.