What Are Economic Indexes?

Economic indexes are the growth drivers behind projected values in your financial model. Every account that extends into projected periods needs a rule for how its values evolve over time. Indexes provide that rule by defining rates of change -- inflation, interest, exchange rates, or custom growth factors -- that the model applies to projected period calculations.

In business terms, an index answers the question: "By how much do we expect this line item to grow (or shrink) in future periods?" A revenue account linked to a 5% inflation index will grow at 5% per period in the projected horizon. A cost account linked to an exchange rate index will fluctuate with currency movements.

The Constant Index

The first index (position 0) is special: it is typically named "Constant" and applies zero growth. An account linked to the Constant index maintains the same value across all projected periods -- no inflation, no growth, no decline.

This is useful for:

• Fixed items that do not change with economic conditions (e.g., a fixed rent contract, a constant tax rate)
• Baseline analysis where you want to see results without growth assumptions
• Placeholder when you have not yet decided which index an account should use

The Constant index should always remain in position 0. Other indexes are defined starting from position 1.

Defining Indexes

Each index has the following properties:

Name

A descriptive label for the index (e.g., "IPCA", "CPI", "Fed Funds Rate", "Revenue Growth"). Choose names that are immediately recognizable to your team. These names appear in the Indexes worksheet and in account configuration dropdowns.

Source

An optional field indicating where the index data comes from (e.g., "Central Bank", "IMF World Economic Outlook", "Internal Forecast"). This is documentation only -- it helps analysts understand the basis for the assumptions and locate updated data when refreshing the model.

Values Per Period

In the generated Excel model, the Indexes worksheet contains one row per index and one column per period. For actual periods, you enter the historical index values. For projected periods, you enter your assumptions. These values drive all projected calculations in the model.

Index Presets

To speed up setup, the application offers preset index collections tailored to common modeling contexts:

Brazil Preset

Includes indexes commonly used in Brazilian financial models:

| Index | Description | |-------|-------------| | Constant | Zero growth baseline | | IPCA | Official consumer price index | | IGP-M | General market price index | | Selic | Central bank benchmark interest rate | | USD/BRL | Dollar-to-Real exchange rate |

US Preset

Includes indexes commonly used in US financial models:

| Index | Description | |-------|-------------| | Constant | Zero growth baseline | | CPI | Consumer Price Index | | Fed Funds | Federal Reserve benchmark interest rate |

Simple Preset

A minimal set for straightforward models:

| Index | Description | |-------|-------------| | Constant | Zero growth baseline | | Inflation | General inflation rate | | Growth | Custom growth factor |

Custom

Start with only the Constant index and define your own indexes from scratch. Use this when none of the presets match your modeling context.

How Indexes Drive Projections

The relationship between indexes and projected values works as follows:

1. Each account in the chart of accounts has a Default Index setting that points to one of the defined indexes.
2. For projected periods, the model applies the index value to compute the account's projected figure. The exact formula depends on the account's sheet type, but generally the index acts as a growth or adjustment factor.
3. Because index values are entered per period, you can model changing rates over time (e.g., inflation at 4% in year 1, declining to 3% by year 3).

This architecture separates economic assumptions (defined in indexes) from financial structure (defined in accounts), making it easy to test different macroeconomic environments without restructuring the model.

The Indexes Worksheet

The generated Excel model includes a dedicated Indexes worksheet with:

• One row per defined index
• One column per period (both actual and projected)
• Cells formatted for percentage or rate entry
• Clear labeling showing index names and period headers

This worksheet is the single source of truth for all economic assumptions in the model. Analysts can update index values here and see the effects propagate through all linked accounts.

How Indexes Connect to Other Sections

• Scenarios -- Each scenario is a complete copy of the Indexes worksheet with different values. The "Base" scenario might use consensus forecasts, while the "Optimistic" scenario uses higher growth rates. See the Scenarios help article for details.
• Accounts -- Every account has a Default Index setting. This determines which row in the Indexes worksheet drives that account's projected values.
• Periods -- Index values are defined for every period. Actual period values represent historical rates; projected period values represent assumptions.

Best Practices

1. Always keep the Constant index at position 0. Many accounts need a "no growth" baseline, and the system expects it at the first position.
2. Use meaningful names. "Inflation" is better than "Index 1." Names should tell analysts exactly what economic variable is being modeled.
3. Document your sources. Future analysts (including yourself six months from now) will need to know where the assumptions came from when it is time to update them.
4. Start with a preset and customize. Presets save time and ensure you have not missed common indexes. Add or remove indexes as needed for your specific model.
5. Review index values annually. Economic assumptions become stale quickly. Build a habit of updating index values when new macroeconomic data is available.
6. Keep the number of indexes manageable. Each index adds a row to the Indexes worksheet and a row to every scenario worksheet. Five to ten indexes cover most modeling needs.