Researcher ORCID Identifier

0009-0009-1880-561X

Graduation Year

2026

Date of Submission

4-2026

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Richard Burdekin

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Terms of Use for work posted in Scholarship@Claremont.

Abstract

This paper examines how U.S. monetary policy tightening affects corporate investment among publicly listed technology and electric vehicle (EV) firms. Using quarterly firm-level data from Compustat over the period 2010 Q2–2025 Q4, I estimate panel regressions with firm and time fixed effects to identify the effect of changes in the Federal Funds Rate (ΔFFR) on capital expenditure intensity and R&D intensity. The main finding is that investment persistence, not monetary policy, is the dominant driver of quarter-to-quarter variation in firm spending: the lagged R&D coefficient of 0.440 indicates that prior-quarter R&D alone explains a large share of current R&D, regardless of interest rate movements. Against this context, ΔFFR is statistically insignificant for CapEx and loses significance for R&D once fixed effects are included. However, M2 money supply growth, which is a measure of broad economic liquidity conditions, is negative and significant for CapEx at the 1% level, suggesting that the money supply channel may be more immediately detectable at the firm level than the interest rate channel. A split-sample analysis comparing EV firms to non-EV technology firms finds no statistically significant difference in investment sensitivity to monetary tightening, though this result is likely driven by the small EV subsample of only five firms and 130 firm-quarter observations. Taken together, the results suggest that aggressive rate hikes are unlikely to immediately reduce innovation spending in the technology sector, and that firms' own prior investment strategies are a stronger determination than any single quarter's policy move.

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