A Monthly Indicator of Economic Activity for Luxembourg

This paper presents a new indicator of economic activity for Lux-embourg, developed using a large database of 99 economic and finan-cial time series. The methodology used corresponds to the generalised dynamic-factor models that has been introduced in the literature by Forni et alii (2005), and the model as been estimated over the period from June 1995 to June 2007. Several means have been used to evalu-ate its forecasting performances and results are satisfactory. They in particular give clear evidence that our indicator allows to obtain bet-ter forecasts of the GDP growth relative to a more classical approach that relies on GDP past values only. This indicator is calculated on an experimental basis and changes may be integrated. ∗Banque centrale du Luxembourg