Evaluating the Effects of Trade Agreements: the Case of North Macedonia

This study aims to evaluate the enhancement effects of trade agreements on North Macedonia’s bilateral trade flows. By applying an augmented gravity model to a panel data set covering 94 countries for the period between 1995 and 2023, we provide evidence that trade agreements indeed enhanced Macedonian trade flows. Findings indicate larger enhancement effects of trade agreements on imports vis-à -vis exports. To some extent, this outcome aligns with expectations since, even before the implementation of these agreements, more than 80 percent of Macedonia's exported goods already targeted destinations covered under current free trade zones. Despite being beneficial, this study also revealed that trade agreements themselves appeared less influential relative to other factors such as shared history and cultural proximity. Evertheless, when analyzing the dynamics of the effects of expansion related to trade agreements over the past twenty years, it becomes obvious that their impact is gradually increasing. However, despite the fact that the initial benefits may seem insignificant, sustainable interaction within trade zones ultimately brings greater benefits over a longer period of time.