Selection of interest and inflation rates for infrastructure investment analyses.

Details

• Creators:
  Qin, Xiao ; Wang, Kai ; Wang, Zhiguang
• Corporate Creators:
  South Dakota State University. Department of Civil and Environmental Engineering
• Corporate Contributors:
  United States. Department of Transportation. Research and Innovative Technology Administration
• Subject/TRT Terms:
  • Infrastructure
  • Investments
  • Inflation
  • Interest rates
  • Economic analysis
  • Decision making
  • Life cycle costing
• Publication/ Report Number:
  MPC 14-275
• Resource Type:
  Tech Report
• Geographical Coverage:
  South Dakota
• Corporate Publisher:
  Mountain-Plains Consortium
• Abstract:
  The South Dakota Department of Transportation (SDDOT) uses engineering economic analyses (EEA) to ; support planning, design, and construction decision-making such as project programming and planning, ; pavement type selection, and the occasional valuing of roads transferred from the state highway system to ; counties and cities. Interest, inflation, and discount rates are three critical factors that significantly affect ; the outcome of an economic analysis. ; The selection and use of appropriate interest and inflation rates for various SDDOT applications are of ; primary concern. The inflation rate currently used by SDDOT is calculated from the South Dakota ; Construction Composite Index (SDCCI). This general rate can neither differentiate between regional ; changes to highway construction costs nor show variation among the individual material inflation rates ; used to create the CCI. In addition, SDDOT generally assumes a zero interest rate which approximately ; equates the real discount rate to the inflation rate. The validity of this assumption needs to be verified. ; Establishing and maintaining sound and equitable rates of interest, inflation, and discount is extremely ; important to SDDOT. Using inappropriate values for interest and inflation rates could unfairly favor ; certain industries and regions, jeopardize economic analyses, and weaken the credibility of SDDOT ; investment decisions. This study is intended to determine whether appropriate rates are being used in ; various applications and to establish a means of obtaining appropriate rates that can help validate, ; support, and enhance SDDOT’s transportation investment decisions.
  More +
• Format:
  PDF
• Download URL:
  https://rosap.ntl.bts.gov/view/dot/28528/dot_28528_DS1.pdf
• File Type:
  [PDF - 1.53 MB]
• Collection(s):
  University Transportation Centers ; US Transportation Collection
• Main Document Checksum:
  urn:sha-512:943c30b66f4abe779d74767ffa493c5099ee776a28ce0740703056badcb677737869af093fadf4d9b114f8b0ee0aec01b2b1a26995ae3c1a67cb746d967a6bef