Essays in European integration and economic inequalities

The ongoing process of economic integration in Europe and beyond has already led to profound changes that are likely to manifest themselves further. Within Europe, formerly centrally planned economies have joined the European Union (EU) with the intention to ultimately introduce the common currency. On a more global scale, marginalised farmers in developing countries seek to become integrated in the world trading system to lift themselves out of poverty. However, issues surrounding economic inequalities are no longer exclusively confined to emerging economies. Indeed, awareness of income inequalities and their impact on the domestic economy is increasing among industrialised nations. This dissertation seeks to contribute to these topical debates in the form of three self-contained essays. The first essay is concerned with monetary integration in Europe. More specifically, we consider the EU member countries from Central and Eastern Europe (CEE) that seek to adopt the euro in the foreseeable future. Our analysis is based on a global VAR (GVAR) model to investigate to what extent central banks in CEE follow the European Central Bank’s lead. We look in another core chapter at the economic implications of the Fair Trade (FT) movement. This is a fairly novel topic to the economics profession and we thus aim to provide intuitive insights. One of the key elements of our trade model is that FT generates and hinges upon economic inequalities. We combine these two aspects in the third core chapter. In particular, we analyse how monetary policy operates in an environment which is characterised by wage inequalities using a New Keynesian model that features heterogeneous labour. The third essay is motivated by the case of the United States, where, similar to many European countries, there is strong empirical evidence for rising internal economic divergence. Overall, the thesis not only combines and investigates topical issues, it moreover does so employing various techniques with the intention to also make contributions on the methodological level. We conclude the monograph by highlighting policy implications and by providing directions for future research