World Bank2016-04-112016-04-112016-01-30https://hdl.handle.net/10986/24043Moldova’s recent Association Agreement with the European Union (EU), which includes a Deep and Comprehensive Free Trade Agreement (DCFTA), represents an important opportunity, as well as challenges. This analytical document has been commissioned by the World Bank Group to provide insights into potential outcomes of the DCFTA and of other trade options that Moldova has, using a Dynamic Computable General Equilibrium (DCGE) model calibrated to its economy. This paper begins by describing the general trends in economic relations between Moldova and the EU over the past 10 years, with an emphasis on trade, as well as Foreign direct investment (FDI) and labor migration. This section includes some additional facts and details that complement the Trade Competitiveness Diagnostic. In the second section, the paper presents the main elements of the DCFTA and highlights the trade commitments and concessions that the EU and Moldova undertook. It also includes a short review of available literature on the ex-ante or ex post impact assessments of other Association Agreements between the EU and third countries that have been done using CGE models. The third section presents key features of the DCGE and discusses the data used for assembling the Social Accounting Matrix (SAM). Then, the main features of the simulated trade scenarios are presented. Finally, this paper discusses the DCGE simulation results, including the effects of the various scenarios on welfare, trade, and economic activity level. Some distributional impacts are also brought into discussion. The final section concludes and makes several recommendations.en-USCC BY 3.0 IGOTARIFFSREGULATORY FRAMEWORKCUSTOMS ADMINISTRATIONCUSTOMS UNIONEXPORT MARKETSCURRENCY APPRECIATIONMULTILATERAL TRADEPROFIT MARGINSEXPORT CAPACITYFREE TRADE AGREEMENTWORLD TRADE ORGANIZATIONPRODUCTIONFOREIGN INVESTORSINCOMEBARRIERS ON IMPORTSEXPECTATIONSTRADE BARRIERSREAL GDPPROPERTY RIGHTSPROTECTIONISTDOMESTIC MARKETEXPORTSNATIONAL TREATMENTSTATISTICAL DATAELASTICITYTRADE AREASEXPORT PRICESECONOMIC RELATIONSWELFARETARIFF CONCESSIONSSPECIAL INCENTIVESOPTIMIZATIONGROSS VALUEINCENTIVESFREE IMPORTSEQUILIBRIUMDISTRIBUTIONINPUTSPAYMENTSFREE TRADETECHNICAL REGULATIONSTRENDSPREFERENTIAL ACCESSTRADE AGREEMENTSCUSTOMS PROCEDURESCUSTOMS DUTIESTRADE IN GOODSINFLUENCETRADE BALANCEFOREIGN TRADETOTAL FACTOR PRODUCTIVITYSAVINGSIMPORT PRICESCOSTSTRADE RESTRICTIONSTELECOMMUNICATIONSRENTCUSTOMSPRODUCTIVITYFREE ACCESSMONOPOLYIMPERFECT COMPETITIONQUOTASCRITERIAEXPORT VOLUMEMARKETSWTOTARIFF REDUCTIONSIMPORTSPREFERENTIAL AGREEMENTSTRADE POLICYELASTICITY OF SUBSTITUTIONAVERAGE PRODUCTION COSTSGENERAL EQUILIBRIUM MODELUTILITYTRADE AGREEMENTCUSTOMS ENFORCEMENTGROSS DOMESTIC PRODUCTTRADE COMPETITIVENESSEXPORT MARKETPRODUCTION INPUTSTAXESPROTECTIONIST MEASURESINTERNATIONAL STANDARDSTRADE VOLUMEEXPORT FACILITATIONCONSUMPTIONGENERAL EQUILIBRIUMTRADE IN SERVICESGROSS FIXED CAPITAL FORMATIONVALUE ADDEDTRAVELCAPITALWAGESTRADE PREFERENCESDEFLATORSINTERNATIONAL TRADEEXPORT COMPETITIVENESSVALUECOMPETITIVENESSTRADE ARRANGEMENTSPRODUCTION FUNCTIONSTRADE DEFICITPURCHASING POWERECONOMIC SECTORSDEVELOPMENT STRATEGYCOMPARATIVE ADVANTAGESEXPORT PRODUCTSDEMANDNATIONAL INCOMEDOMESTIC SALESEXPECTED VALUEECONOMYCONSUMERSAGRICULTURETAX RATESTRADE AREATRADE FACILITATIONTRADE LIBERALIZATIONPRODUCTION FUNCTIONPREFERENTIAL TREATMENTSKILLED LABORTRADE DIVERSIONTRADEECONOMIC INTEGRATIONMUTUAL RECOGNITIONGDPEXPORT PRICEGOODSECONOMIES OF SCALEGENERALIZED SYSTEM OF PREFERENCESGROWTH RATEBILATERAL TRADEMARGINAL REVENUEINVESTMENTSUPERMARKETSHOTELSDOMESTIC PRODUCTIONCUSTOMS UNIONSTARIFFTRADE RELATIONSTRADE SANCTIONSFREE TRADE AREACONSUMER PRICE INDEXWORLD TRADETARIFF CONCESSIONMOST FAVORED NATIONPREFERENTIAL TARIFFPRICE INDEXESFINANCIAL SECTOROUTCOMESIMPORT DUTIESIMPORT DUTYTRADE REGIMECUSTOMS DECLARATIONSOUTSOURCINGUNSKILLED LABORTARIFF TREATMENTPRICESPRODUCTION COSTSBENEFITSADAPTIVE EXPECTATIONSINEQUALITYReportWorld Bank10.1596/24043