J Curve (Economics) - Explained
What is the J Curve?
Written by Jason Gordon
Updated at March 28th, 2023
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What is the J Curve?
A J curve is a visual depiction of a situation in which a measured factor decreases sharply over time before stabilizing and then improving quickly.
In economic theory, the J Curve has been used to demonstrate that a country's trade balance declines after devaluation of its currency before it gradually improves
The deficit will worsen because depreciation in a country's currency will have an effect on the prices of foreign imports, the prices on imports will increase while the volume of imports decreases.
Also, it depicts how the changes in the price of foreign imports will be greater than the reduced volume of imports.
This change will, however, positively affect the balance of trade because it will cause an increase in exports and decrease in imports. .
Back to:ECONOMIC ANALYSIS & MONETARY POLICY
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