ABSTRACT
This paper aims to examine the causal relationship between workers (cross-border and resident workers) and financial instability in the Luxembourg financial centre, 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.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1 They impose linear restrictions on the autoregressive parameters in a vector autoregression (VAR) model.
2 Like the Bureau of Labor Statistics (for example), we removed the influences of predictable seasonal patterns.
3 The STATEC definition of the variable C.B. workers is ‘non-residents working on national territory’.
4 The detailed results for the stationarity tests are available upon request.
5 We get the same conclusions for resident workers.
6 We also get almost similar results using CAC40 and DAX variables.
7 January 2010 marks the end of the decline of cross-border workers (see ).
8 The conventional time-domain causality test presents the same conclusions.