THE CAUSAL RELATIONSHIP BETWEEN INSTITUTION AND TRADE. EVIDENCE FROM THE REPUBLIC OF MOLDOVA - THE EUROPEAN UNION
THE CAUSAL RELATIONSHIP BETWEEN INSTITUTION AND TRADE. EVIDENCE FROM THE REPUBLIC OF MOLDOVA - THE EUROPEAN UNION

Summary/Abstract: The current paper aims to analyse whether there is a causal relationship between institutions and trade between the Republic of Moldova and the European Union after the signing of the Association Agreement. On the one hand, the existing theory of institutionalism points out that better quality of institutions leads to a significant increase in trade, thus countries with the same level of institutions tend to trade more and also trade might produce institutional change. On the other hand, some scholars emphasise that institutions are hard to change, thus trade liberalisation is ideal and trade will produce institutional change. Based on mixed methods analyses of reports, data and survey this paper concludes that there is no causality between institutions and trade taking into account the relationship between the Republic of Moldova and the European Union. Notwithstanding, institutions are important and influence commercial flows. This research is relevant to the extent that the European Union wants to strengthen its strategy towards Eastern countries especially the Republic of Moldova.

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