2. Go to the St. Louis Federal Reserve FRED database, and find data on the St. Louis Fed financial stress index (STLFSI), the percent value of loans collateralized for commercial and industrial loans (ESAXDBNQ), and the net percentage of loan officers reporting tighter credit standards (DRTSCILM). Use the frequency setting to convert the financial stress index to Quarterly. Download the data into a spreadsheet.

a) Calculate the average of the three series over the most recent four quarters of data available, and the average over the four quarters prior to that. How has the amount of collateralization, credit standards, and financial stress changed over these two periods?

b) Repeat part (a) by calculating the averages for 2007 and 2008.

c) Assuming the financial stress index reflects asymmetric information problems, comment on how collateral and credit standards change as asymmetric information problems change. Is this consistent with what you would expect? Why or why not?