DSE News Network
News coming through to the DSE News Network is that: the Ndlovu Currency Confidence Index (NCX): the economic indicator designed to measure how much confidence markets and the public have in a country’s currency and monetary policy – is due to receive an international award in Johannesburg this week.
Impeccable sources said this week that the NCX Index – which was developed by financial economist and currencies expert Collet Ndlovu – has been recognised for its futuristic approach to global markets and investment intelligence.
“Confidence is an intangible asset in economics. By virtue of its intangibility, its intrinsic value is difficult to measure, let alone to manage and quantify. What we have done at the NCX is to apply a theoretical/analytical economic model intended mainly for policy analysis and research.
“In terms of monetary policy, confidence is gained if the public believes that the monetary authorities will actually carry out their stated objectives like price and currency stability.
“In this model confidence is ipso facto intertwined with trust, that is to say, faith in the soundness of the monetary system. The inflation expectations of the market and, the foreign exchange value of the currency tend to be aligned with the actions of the monetary authorities,” Ndlovu said.
He added that the NCX Index quantified currency confidence — which is normally a qualitative concept—by comparing: expected inflation in the economy, actual or targeted inflation by policymakers, market expectations of the exchange rate, and the official exchange-rate targets set by authorities.
The idea of the index is that the closer market expectations are to the official targets, the higher the confidence in the currency.
The index focuses on the gap between: Official policy targets (inflation target + exchange-rate target), and market expectations of those same variables.
Ndlovu said that it had taken years to develop a model that is aimed to guide central banks and policymakers, and a model that could detect early warning signs of currency instability.
While exact details of the award are still coming through, exports on the DSE News Network said that while the NCX Index did not have a widely standardised published equation like CPI or DXY – it was rather based on the methodology and mathematical structure that could be reconstructed from tangible components.
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