If there is a monthly model and requirement various adjustment of inflation / growth rates. What would your approach be?
For example will it be under REV/EXP module monthly time series as a single row or would you add an annual component to have annual adjustment from there then bring back to monthly worksheet?
I am thinking first option makes more sense if there are a lot of revenue modules for different product lines. But downside is the entry in monthly frequency is becoming quite hard to maintain as the number of period increases.
Second option is a lot tidier under monthly module, result will be n tabs for each product + 1 tab for annual inflation with n modules. Here assuming not use mirroring module I feel it did not work from time to time.
Also a third option it is standalone and get linked into the revenue module. but I could not figure out for example with 10 inflation adjustments line, how to link in just the ones I want to use and make it dynamic.
Will really like to hear how you handle the adjustment lines? From annual to monthly and from many options to a selected line.
Hello Hengjia,
I am also interested in incorporating inflation assumptions into my 'master' financial model. Attached is my worked example of how I would approach the challenge.
I started with the Exchange Rates (Opening, Average and Closing) module and placed it within Appendices on the expectation that inflation will impact multiple modules throughout the model.
I renamed the module Inflation Rates and made some quick and dirty revisions such that you enter monthly inflation percentages and it generates inflation indexes (module links out).
I then linked in all the inflation indexes into the revenue module, inserted a lookup table and then a drop down box to allocate the desired inflation index against each revenue category.
It's a quick and dirty example but I think it works reasonably successfully. It's unlikely there will be vast amounts of inflation indexes, you had ten in mind.
Look forward to hearing your thoughts on this.
Matt