• Apostolos PAPAPHILIPPOU PhD, Four Assist Development Consulting Limited


Gross Fixed Capital Formation, Gross Domestic Product, Incremental Capital‐Output Ratio, economic policy


The paper analyses the notion of an economy’s Incremental Capital‐Output Ratio and proceeds to provide estimates of the Incremental Capital‐Output Ratio for the Moldovan economy utilising National Accounts data. The purpose of the study is to calculate estimates of the Incremental Capital‐ Output Ratio for the Moldovan economy’s transition period to date, utilise the derived estimates to analyse aspects of economic growth in Moldova over its transition period and use the average value of the Incremental Capital‐Output Ratio over the recent period for simulation and forecasting purposes. On the whole the reported empirical estimates of the Incremental Capital‐Output Ratio for the Moldovan economy lie within the range of values reported in the economic literature. Furthermore, the evolution of the Incremental Capital‐Output Ratio in the first few years of sustainable growth in Moldova reflects the wide availability of unemployed or underemployed resources in the economy at the time thus allowing the achievement significant economic growth which was associated with low values of the Incremental Capital‐Output Ratio over the period. The paper proceeds to utilise the recent Incremental Capital‐Output Ratio estimates for the Moldovan economy over the period 2015 to 2019 inclusive to calculate an average estimate of the Incremental Capital‐Output Ratio and use this average estimate to generate estimates of the Gross Fixed Capital Formation ratios as a share of GDP required to reach a number of indicative growth paths in the medium to long term. It is notable that the growth path which is attainable given current conditions in the economy is close to the latest medium term forecasts by International Financial Institutions and the Ministry of Economy and Infrastructure. The paper concludes by discussing the design of economic policy and development planning in Moldova and suggesting areas for further work.


Download data is not yet available.


Domar, E. D. (1946). Capital Expansion, Rate of Growth, and Employment. Econometrica, 14(2), 137. https://doi.org/10.2307/1905364

Gros, D., & Steinherr, A. (1995). Winds of Change: Economic Transition in Central and Eastern Europe.

Harrod, R. F. (1939). An Essay in Dynamic Theory. The Economic Journal, 49(193), 14. https://doi.org/10.2307/2225181

International Monetary Fund. European Dept. (2020). Republic of Moldova: Staff Report for the 2020 Request for Disbursement Under the Rapid Credit Facility and Purchase Under the Rapid Financing Instrument-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Moldova. IMF. https://www.imf.org/en/Publications/CR/Issues/2020/04/22/Republic-of-Moldova-Staff- Report-for-the-2020-Request-for-Disbursement-Under-the-Rapid-49364

Ministerul Economiei şi Infrastructurii al Republicii Moldova. (2020). Notă cu privire la prognoza revizuită a principalilor indicatori macroeconomici pentru anii 2021-2023. https://mei.gov.md/sites/default/files/document/attachments/nota_prognoza_macro- noiembrie_2020-site.pdf

Orlowski, L. T. (1993). Indirect transfers in trade among former Soviet Union Republics: Sources, patterns and policy responses in the Post‐Soviet period. Europe-Asia Studies, 45(6), 1001–1024. https://doi.org/10.1080/09668139308412138

Ramos, R. L. O., Lisbeth, R., & Gonzalo, C. P. (2008). Latin America: Highlights from the Implementation of the System of National Accounts 1993 (1993 SNA). IMF. https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Latin-America-Highlights- from-the-Implementation-of-the-System-of-National-Accounts-1993-22379

Tarr David, G. (1994). The Terms-of-Trade Effects of Moving to World Prices on Countries of the Former Soviet Union. Journal of Comparative Economics, 18(1), 1–24.

The World Bank. (2020). Moldova Economic Update: Winter 2020. http://pubdocs.worldbank.org/en/152271608708764457/Moldova-Economic-Update-Dec- 22.pdf

Thirlwall, A. P. (1989). Growth and Development. Macmillan Education UK. https://doi.org/10.1007/978-1-349-19837-5


Abstract views: 53



How to Cite

PAPAPHILIPPOU, A. (2022). ON MOLDOVA’S INCREMENTAL CAPITAL-OUTPUT RATIO AND THE DESIGN OF ECONOMIC POLICY. Economy and Sociology, (1), 6–15. Retrieved from http://es.ince.md/index.php/Economy_and_Sociology/article/view/85