# Economic Drivers

This article focuses on **economic drivers** in Model Reef.

You will learn:

* What counts as an economic driver.
* How to store economic drivers in the Data Library.
* How to connect them to variables and valuation logic.
* Patterns for using market and macro data safely.

Economic drivers describe external or pricing related inputs that influence revenue, costs and valuation.

{% stepper %}
{% step %}

### What is an economic driver

Economic drivers typically include:

* **Prices and tariffs**
  * List prices, per unit rates, contract pricing tiers.
* **FX rates**
  * Currency pairs such as GBP to USD, EUR to GBP.
* **Inflation and escalation indices**
  * General inflation, wage inflation, rent escalators.
* **Market indices and benchmarks**
  * Equity indices, sector indices, commodity indices.
* **Interest rates and yields**
  * Base rates, risk free rates, credit spreads, curves.

These drivers are numeric time series that influence the economic environment of the model.
{% endstep %}

{% step %}

### Storing economic drivers in the Data Library

Each economic driver is stored as a Data Library entry, for example:

* `Driver - Price - Subscription - Enterprise`.
* `Driver - FX Rate - GBP to USD`.
* `Driver - Inflation - General - UK`.
* `Driver - Index - Commodity Basket`.
* `Driver - Base Rate - Central Bank`.

When you create or import an economic driver, you specify:

* Name and description.
* Frequency (daily, weekly, monthly, etc.).
* Units (for example GBP, index points, percentage).
* Tags such as `FX`, `Inflation`, `Market`, `Rates`.

Economic drivers can come from:

* Manual inputs.
* CSV or Excel imports.
* Stock ticker fundamentals or market data feeds.
* Google Finance, Yahoo style or similar APIs.
  {% endstep %}

{% step %}

### Using economic drivers in revenue and cost variables

Common patterns include:

* **Price based revenue**
  * `Revenue = Units * PriceDriver`.
  * Example: subscriptions charged per seat at a price that escalates annually.
* **FX translation**
  * `Revenue = ForeignRevenue * FXRate`.
  * `COGS = ForeignCost * FXRate`.
  * Useful when modelling foreign currency operations in a single reporting currency model.
* **Inflation adjusted costs**
  * `Opex = BaseCost * InflationIndex`.
  * `Staff Cost = BaseSalary * WageInflationIndex`.

Economic drivers allow these relationships to be expressed once and reused across the model.
{% endstep %}

{% step %}

### Using economic drivers in capex, debt and valuation

Economic drivers also play a role in:

* **Capex modelling**
  * Linking capex estimates to commodity or construction cost indices.
  * Scaling future project costs with inflation drivers.
* **Debt and interest**
  * Indexing loan interest rates to base rates plus spreads.
  * Testing the impact of higher rate curves on interest expense.
* **Valuation**
  * Using risk free rates and spreads as inputs into discount rate assumptions.
  * Linking scenario discount rates to economic driver series.

Economic drivers provide a bridge between market conditions and cashflow projections.
{% endstep %}

{% step %}

### Scenario design with economic drivers

When designing scenarios, you can:

* Change economic drivers while keeping operational drivers fixed to simulate macro shifts.
* Or hold economic drivers constant and vary operational drivers to simulate execution risk.
* Or change both to explore combined effects.

Examples:

* Downside scenario with lower price growth and higher interest rates.
* Upside scenario with stronger market growth and favourable FX.
* Stress test scenario with a shock to commodity prices.

Because drivers are scenario specific at model level, each scenario can have its own driver paths.
{% endstep %}

{% step %}

### Good practice for economic drivers

Guidelines:

* Keep economic drivers **separate** from accounting variables.
* Use clear naming for scope and units.
* Document sources and update cadence in notes.
* Avoid over fitting to noisy market data; focus on drivers that materially affect decisions.
* Prefer smooth, scenario based paths over raw daily noise for long term planning.

This keeps models robust while still responsive to key economic assumptions.
{% endstep %}
{% endstepper %}

## Related articles

* [Mine/Well Production Forecasts](/use-cases/mining-energy-and-natural-resources/mine-well-production-forecasts.md)
* [Build an LBO Model](/how-tos/investment-and-transactions/build-an-lbo-model.md)
* [Driver Escalation Rules](/help/drivers-variables-and-timing/driver-escalation-rules.md)
* [Modifier Driver Fields](/syntax/drivers-syntax/modifier-driver-fields.md)


---

# Agent Instructions: Querying This Documentation

If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter:

```
GET https://help.modelreef.io/help/drivers-variables-and-timing/economic-drivers.md?ask=<question>
```

The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.