Measuring the impacts of the National Flood Insurance Program

Below are the slides from my presentation at the William and Mary Graduate Research Symposium. The associated paper can be downloaded from SSRN.

A slightly revised version will appear at the UMBC Graduate Research Conference next month.

Fiscal Year CPI Indicators

As noted before, the federal fiscal year can cause problems for economic analysis when converting from nominal dollars to constant dollars because the federal fiscal year runs from October 1 to September 30 and annualized rates for CPI are from the calendar year.  The Consumer Price Index is published by the Bureau of Labor Statistics which also publishes monthly figures.

This table is a fiscal year annualized CPI dataset for 1977-2011.  The figures are given by averaging the monthly figures from October through the following September of each year.  Like the traditional annualized CPI figure from BLS, this is calibrated to (calendar) 1982-1984=100, so the figures will be close to the calendar rates and could even be used to convert between the calendar and fiscal year, if necessary.

Dissertation Proposal Defended

I defended and passed my dissertation proposal yesterday.  One of the more challenging aspects the public policy program at UMBC is the amount of information going into the proposal.  Where some programs and schools have relatively short proposals, glorified abstracts, and an informal approval process, the public policy program requires the bulk of the literature review, fully developed methodology, and justifications for the study.  As a result of this, our proposals run long. 

Mine is 114 pages.  The benefit in this work is today, a day after my proposal defense, a rough draft of my dissertation's first three chapters is done. 

Ex-Post Social Discount Rates

When performing ex post analysis for net social benefits, there is surprisingly little guidance on the matter of selecting a social discount rate.  This is remarkable given the handwringing by the Office of Management and Budget, the Congressional Budget Office, and many others over the matter in ex ante regulatory analysis.  Regardless, it is sometimes important to consider the historical impact of a program to provide a framework for understanding changes to that program, similar new programs, or simply to see if the benefits projected at the start materialized.

One school of thought when perform ex ante regulatory analysis is to estimate the social discount rate at the using the governmental borrowing rate.  (Other potential rates are discussed in, among others, Cost-Benefit Anaylsis: Concepts and Practice by Boardman, et al.)  I think when performing an ex post analysis, there is significant justification for using the governmental borrowing rate and it is convenient is the borrowing rate is both observable and known.  For this, I have created a pair of tables available as Google Tables, that represent the annualized borrowing rate for the United States government for calendar years and fiscal years.  Each table provides the base cost for borrowing at one, two, three, five, seven, ten, 20, and 30 year terms.  Below is an abbreviated sample.

Year	1-Year	10-Year	30-Year
2009	0.47	3.26	4.08
2010	0.32	3.22	4.25
2011	0.18	2.78	3.91

The fiscal year table provides each from 1977 onward, due to the shift in the federal fiscal year to October 1-September 30 beginning that year.  There are gaps in the 30-year rate for 2003, 2004, and 2005 and in the 20-year rate from 1988 through 1993 due to a lack of date.  The calendar year table provides the one, three, five, and ten year rates from 1962 onward.  Other rates start in different years after 1962.

This data was compiled from the H.15 public release (Selected Interest Rates) of the Federal Reserve Board (disclaimer: I am employed by the Federal Reserve Board) using the Treasury constant maturities data sets.  The calendar year data is comes directly from the historical section's annual tables for each maturity.  The fiscal year is the arithmetic mean of the monthly rates during the fiscal year. Generally speaking, this is not the actual borrowing rate but instead represents the expected borrowing rate for the federal government during the time frame in question for the given maturity.  As a result, this is a close approximation to the rate necessary for ex post social discounting.