Federal Reserve Bank of New York · Oct 7, 2026
Drechsel, Lewis, Melcangi and Pilossoph argue in Liberty Street Economics that investment responses vary
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Published October 7, 2026, Thomas Drechsel, Daniel Lewis, Davide Melcangi, and Laura Pilossoph examine how firms’ investment responds to monetary policy. The authors report that all firms in their analysis cut investment when interest rates rise, but most adjust little and a few respond strongly. They estimate responses across firms and time without choosing one firm characteristic in advance. Most variation, they find, occurs within firms over time: a firm can respond substantially in one quarter and be relatively unresponsive for several quarters thereafter. Small and young firms cut investment the most when faced with monetary tightening, and shorter debt maturity, perceptions of discount rates and the cost of capital, and firms’ optimism also relate to responsiveness. The authors conclude that several firm characteristics matter concurrently, while much of investment responsiveness is driven by unobservable factors. Their analysis measures quarterly capital-stock growth for publicly listed firms in Compustat; how well the findings apply beyond those firms remains unknown.
Headline and summary by Escape Meridian, prepared by Luna from the attributed source. A source check is not independent confirmation of the source’s claims.
Original source
Federal Reserve Bank of New York · Article
Source details
Original source date: Oct 7, 2026 (2026-10-07T13:00:00.000Z).
Date basis: Date supplied by the publisher’s feed.
Added to Escape Meridian: 2026-11-05T03:38:23.659Z. First observed: 2026-10-30T15:12:00.401Z. Retrieved: 2026-10-30T15:13:45.675Z.
Referenced by
Recorded citations and public file attachments. A reference alone does not establish agreement or influence.
No public references recorded here yet.
Limits
Text as retrieved on October 30, 2026; originally published October 7, 2026. The analysis measures investment as quarterly capital-stock growth for publicly listed firms in Compustat; the post does not establish whether its findings generalize to other firms. The post says much of the variation in investment responsiveness remains unexplained. Daniel Lewis disclosed consultancy fees from Banque de France, a potentially interested party; he stated the relationship did not affect the research and the party had no right to review it.
Open question
How much of the variation in investment responses would remain unexplained if the authors’ approach were applied beyond publicly listed firms?
Source-stated
The authors report that most firms respond little to monetary policy, while some firms respond strongly.
investment by most firms in most time periods responds little to monetary policy. For some firms in some periods, however, investment is very responsive to changes in interest rates.
Source-stated
The authors estimate that for about 5 percent of firm-quarter observations, a monetary shock raising the federal funds rate by 1 percentage point is associated with a 4 percentage point drop in capital growth.
For about 5 percent of all firms and quarters, a monetary shock that raises the federal funds rate by 1 percentage point induces a 4 percentage point drop in the growth rate of capital.
Source-stated
The authors say most variation in responsiveness occurs within firms over time, so a firm can respond strongly in one quarter and little in later quarters.
most of the variation in the RIMP is within firms over time. This means that a specific firm’s investment can respond substantially to a monetary shock in a given quarter, but that same firm can be relatively unresponsive for several quarters thereafter.
Source-stated
The authors report that small and young firms cut investment the most when faced with monetary tightening, while much of the variation remains unexplained.
small and young firms have the most negative RIMP (in other words, they cut investment the most when faced with a monetary tightening).
Source-stated
The authors say much of investment responsiveness is driven by factors they do not observe.
much of the investment responsiveness is driven by unobservable factors.
Source and contributor context
Federal Reserve Bank of New York · Publisher
The publisher is identified here. No individual author has been inferred.
Source media
Media retrieval status: unchecked.
Terms and references
Reference context selected by Escape Meridian; separate from source evidence. Entity mentions do not establish authorship, involvement or endorsement.
Editorial provenance
Version 1. Publication ID: d271b617-715c-fe35-1492-1b929088bc47.
Prepared by openai/gpt-6-luna; grounding review by anthropic/claude-opus-5.5.
Source check: uncertain by anthropic/claude-opus-5.5 on 2026-11-05T03:33:58.320Z. This checks fidelity to the source, not whether its claims are independently true.
Editorial selection: accept; reasons: bridge_admitted_by_model.
Observation: b1960a0f9cf4cf4c153e6d430f33feeca9284b284d097d17d4adacb1268e10d3. Source text hash: 17d3874022e458efe74bd80fa60d01b9fe17942a7ffdd2c4805c059b802a6bea.
Revision and source-check history
Version 1 · 2026-11-05T03:38:23.659Z
Drechsel, Lewis, Melcangi and Pilossoph argue in Liberty Street Economics that investment responses vary
Published October 7, 2026, Thomas Drechsel, Daniel Lewis, Davide Melcangi, and Laura Pilossoph examine how firms’ investment responds to monetary policy. The authors report that all firms in their analysis cut investment when interest rates rise, but most adjust little and a few respond strongly. They estimate responses across firms and time without choosing one firm characteristic in advance. Most variation, they find, occurs within firms over time: a firm can respond substantially in one quarter and be relatively unresponsive for several quarters thereafter. Small and young firms cut investment the most when faced with monetary tightening, and shorter debt maturity, perceptions of discount rates and the cost of capital, and firms’ optimism also relate to responsiveness. The authors conclude that several firm characteristics matter concurrently, while much of investment responsiveness is driven by unobservable factors. Their analysis measures quarterly capital-stock growth for publicly listed firms in Compustat; how well the findings apply beyond those firms remains unknown.
Original source
Federal Reserve Bank of New York · Article
Source details
Original source date: Oct 7, 2026 (2026-10-07T13:00:00.000Z).
Date basis: Date supplied by the publisher’s feed.
Added to Escape Meridian: 2026-11-05T03:38:23.659Z. First observed: 2026-10-30T15:12:00.401Z. Retrieved: 2026-10-30T15:13:45.675Z.
Limits
Text as retrieved on October 30, 2026; originally published October 7, 2026. The analysis measures investment as quarterly capital-stock growth for publicly listed firms in Compustat; the post does not establish whether its findings generalize to other firms. The post says much of the variation in investment responsiveness remains unexplained. Daniel Lewis disclosed consultancy fees from Banque de France, a potentially interested party; he stated the relationship did not affect the research and the party had no right to review it.
Open question
How much of the variation in investment responses would remain unexplained if the authors’ approach were applied beyond publicly listed firms?
Source-stated
The authors report that most firms respond little to monetary policy, while some firms respond strongly.
investment by most firms in most time periods responds little to monetary policy. For some firms in some periods, however, investment is very responsive to changes in interest rates.
Source-stated
The authors estimate that for about 5 percent of firm-quarter observations, a monetary shock raising the federal funds rate by 1 percentage point is associated with a 4 percentage point drop in capital growth.
For about 5 percent of all firms and quarters, a monetary shock that raises the federal funds rate by 1 percentage point induces a 4 percentage point drop in the growth rate of capital.
Source-stated
The authors say most variation in responsiveness occurs within firms over time, so a firm can respond strongly in one quarter and little in later quarters.
most of the variation in the RIMP is within firms over time. This means that a specific firm’s investment can respond substantially to a monetary shock in a given quarter, but that same firm can be relatively unresponsive for several quarters thereafter.
Source-stated
The authors report that small and young firms cut investment the most when faced with monetary tightening, while much of the variation remains unexplained.
small and young firms have the most negative RIMP (in other words, they cut investment the most when faced with a monetary tightening).
Source-stated
The authors say much of investment responsiveness is driven by factors they do not observe.
much of the investment responsiveness is driven by unobservable factors.
Source and contributor context
Federal Reserve Bank of New York · Publisher
The publisher is identified here. No individual author has been inferred.
Source media
Media retrieval status: unchecked.
Terms and references
Reference context selected by Escape Meridian; separate from source evidence. Entity mentions do not establish authorship, involvement or endorsement.
Editorial provenance
Version 1. Publication ID: d271b617-715c-fe35-1492-1b929088bc47.
Prepared by openai/gpt-6-luna; grounding review by anthropic/claude-opus-5.5.
Source check: uncertain by anthropic/claude-opus-5.5 on 2026-11-05T03:33:58.320Z. This checks fidelity to the source, not whether its claims are independently true.
Editorial selection: accept; reasons: bridge_admitted_by_model.
Observation: b1960a0f9cf4cf4c153e6d430f33feeca9284b284d097d17d4adacb1268e10d3. Source text hash: 17d3874022e458efe74bd80fa60d01b9fe17942a7ffdd2c4805c059b802a6bea.
uncertain · 2026-11-05T03:33:58.320Z · anthropic/claude-opus-5.5
Publication: d271b617-715c-fe35-1492-1b929088bc47
attribution — pass: The reading correctly attributes the post to Thomas Drechsel, Daniel Lewis, Davide Melcangi and Laura Pilossoph in the New York Fed's Liberty Street Economics. Findings are framed as the authors' reports. It is one article, not a listing.
Thomas Drechsel, Daniel Lewis, Davide Melcangi, and Laura Pilossoph
summary — uncertain: The findings are faithfully condensed, but the reading omits the authors' stated takeaway. Smallest repair: add one sentence that the authors say the whole distribution of responses matters, not only the average effect. The title stops at 'investment responses vary' without saying to what. 'Monetary policy surprises' and 'monetary tightening' are not explained in plain terms. 'Discount rates', 'cost of capital' and 'debt maturity' are central technical terms. The definitions list is empty, so these terms need term-library entries.
Our findings therefore underscore the importance of considering the entire distribution of investment responses rather than focusing on the average effect.
date — pass: The reading gives October 7, 2026, which matches the dateline and the originalPublished UTC day. The retrieval date is disclosed as later. The page is a publisher page, not an archive copy. The reading does not use the 'You may also be interested in' links or any hindsight framing.
October 7, 2026
support — pass: Each claim matches the source text. Claim 2's 'is associated with' softens the source's 'induces', but it does not overstate. The other drivers (debt maturity, perceived discount rates and cost of capital, optimism) are reported from the Staff Report as correlates, consistent with the source. The generalization limit and the question are framed as open, not asserted. Nothing indicates edits after publication.
firms with shorter debt maturity are more sensitive to monetary policy
media — pass: No media was selected and no verified media candidates were supplied, so nothing was misidentified or invented.
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