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Country Image and International Trade

Pao-li Chang and

Tomoki FUJII

Working paper

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Tomoki FUJII

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This paper studies the impact of country image on international trade flows. They find that a one percentage point in the positive response ratio- the proportion of people in the importing country who view the exporting country positively- is associated with at least a one percent increase in the aggregate trade flow. By disaggregating trade flows by the type of goods, we also find that both homogenous and differentiated goods are positively affected by better country image and that the impact of country image tends to be larger when more substitutes are available in the international market.