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Economic Rates of Return (ERR)

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Overview

screenshot of an E.R.R. spreadsheet

A screen shot of an ERR Excel spreadsheet.

MCC is making available its Economic Rate of Return (ERR) data via interactive, downloadable Microsoft Excel spreadsheets. the spreadsheets are unique to each project within a compact.

Each spreadsheet includes:

  • A description of the project, including its economic rationale;
  • The expected project impacts, including detailed cost and benefit estimates;
  • A tool allowing users to modify key assumptions and study the effects of those modifications on the project’s returns.

Some familiarity with cost-benefit analysis will be essential to use these spreadsheets.

The Essence of the Economic Rate of Return (ERR)

At its core, an ERR is a comparison of the costs and benefits of a public investment. In MCC’s analysis, the costs of a project reflect the necessary financial expenses, including those covered by other parties. The benefits include the increased income of a country’s population or value added by its firms due specifically to the proposed project. Estimating the ERR of a proposed project before the investment is made offers MCC a forecast of the project’s likely economic impact. More details on how the ERR is calculated are provided on subsequent pages.

Publicly Sharing ERRs

One of MCC’s guiding principles is that foreign assistance should reinforce good governance practices, including enhanced transparency in government decision-making. As one of its initiatives aimed at increased transparency, MCC is making the ERR spreadsheets that were used in its funding decisions publicly available on its website. The spreadsheets are being released in Microsoft Excel format so that users can interact with the formulas, supporting data, and underlying assumptions used in the calculations . In addition, many of the files include interactive components that allow users to change key assumptions and see how those changes affect the project’s ERR.

The spreadsheets reflect the technical rigor of the original economic calculations. In an effort to make the spreadsheets more broadly accessible, we have included a project description and a user’s guide in each file.
 

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