J Curve
What Does J Curve Mean?
A theory stating that a country's trade deficit will worsen initially after the depreciation of its currency because higher prices on foreign imports will be greater than the reduced volume of imports.
Investopedia explains J Curve
The effects of the change in the price of exports compared to imports will eventually induce an expansion of exports and a cut in imports--which, in turn, will improve the balance of payments.
Related Links
- Economics Basics - Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
- Current Account Deficits - Find out what it means when more funds are exiting than entering a nation.
- What Is The Balance Of Payments? - Countries track money coming in and going out through something called the balance of payments. Learn more here.