Measuring Smuggling through the Gravity Equation and the Mimic Model: Evidence from the Republic of Moldova

Abstract

This paper evaluates the impact of Free Trade Agreements (FTAs) on the Republic of Moldova’s external trade using a structural gravity model framework. By employing bilateral trade data from 2001 to 2024, the study examines both exports and imports using two econometric approaches: Ordinary Least Squares (OLS) and Poisson Pseudo-Maximum Likelihood (PPML). The results confirm that the Republic of Moldova's participation in FTAs—especially with the European Union (DCFTA), CEFTA countries, and CIS partners—has significantly enhanced export flows, while the effects on imports remain mixed. The analysis highlights the importance of economic size and geographical distance, as well as the statistically significant contribution of FTAs to the Republic of Moldova's export performance. However, the asymmetric impact on imports underscores the need for tailored trade policy instruments and institutional support to fully realize the benefits of trade liberalization. This research contributes to a deeper understanding of the Republic of Moldova’s trade dynamics and provides empirical insights relevant for regional integration and sustainable economic development. UDC: 330.43:343.37(478); JEL: F17