Ex ante

Ex ante is a term from Latin that means before the event. It is used in economics , in general, to name the projected results of one or more decisions.

We are referring then to the analysis prior to an event. The opposite is ex post that is synonymous with subsequent.

Uses of the term ex ante

Some uses of the term ex ante are:

  • Finance:  It is used to name the  expected return of a financial security or portfolio. It is an estimate, but not a real result.
  • Hiring:Resources allocated to future projects are allocated ex ante, that is, in advance. This, in order to guarantee the respective investment.
  • Macroeconomics: The savings and investment ex ante are those planned, for example, for next year, ie, it is an objective. Meanwhile, the ex post data are those recorded in reality, after the period in question.

Ex ante evaluation of projects

The evaluation of a project is carried out at three key moments: Ex ante, at the time of its completion and ex post. In this section, we will focus on the first phase.

The previous study consists in comparing the possible impacts of the decisions that are part of a project. That is, different scenarios are compared, performing a cost / benefit analysis . This methodology can be applied, for example, in public investments in different areas such as infrastructure, health, employment, environment, among others.

To prepare this type of evaluation, the indicators of interest are selected first, whether quantitative or qualitative. We do not refer, for example, to the Net Present Value (NPV) or the Internal Rate of Return (IRR).

In this way, a baseline or starting point is established that will be compared with the estimated results. This, always taking the same time horizon and target audience.

by Abdullah Sam
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