Cross-border Workers and Financial Instability: A Frequency Domain Causality Analysis Applied to the Luxembourg Financial Center
Yamina Tadjeddine  1@  , Vincent Fromentin  2  
1 : Bureau d'Economie Théorique Appliquée  (BETA)
Centre national de la recherche scientifique - CNRS (France), université de Strasbourg, Université de Lorraine
2 : University of Lorraine, Nancy
CEREFIGE

This paper aims to examine the causal relationship between workers (cross-border and resident workers) and financial instability in the Luxembourg financial center, using a Granger causality test in the frequency domain. The evidence shows that cross-border workers are more sensitive to financial shocks than resident workers. In addition to the causal relationship there is a “nonlinear” reaction: one smooth in the short term and a second more structural one in the long term.


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