Assessing Moldova's Economic Dynamics Using the Cobb-Douglas Production Function: Estimation, Validation and Forecasting

Abstract

The study evaluates the economic dynamics of the Republic of Moldova based on the Cobb–Douglas production function, with the aim of estimating, validating and forecasting the relationships between capital, labor and output. The econometric analysis, carried out on the basis of annual data for the period 1994–2024, included testing for stationarity, normality, autocorrelation and homoscedasticity, applying the Newey–West correction. The obtained coefficients (α≈0.37, β≈0.63) confirm the hypothesis of constant returns to scale and are consistent with the results from the international literature. The model integrated Dummy variables to capture the structural shocks of 1996 (transition to a market economy) and 2022 (the war in Ukraine and the energy crisis), which had negative effects on productivity. The forecasts for 2025–2026 anticipate moderate GDP growth (2.5% and 3.6%), supported by capital intensity and labor dynamics, but limited by low total factor productivity. The results highlight the importance of investments in infrastructure, digitalization, and institutional reforms to strengthen resilience and long-term economic growth. UDC: 330.44+338.27:338(478); JEL: A2, C5, E6