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.

Filed Under: Economics

Related Terms

Balance of Payments
Balance of Trade
Deficit
Economics
Export
Import
Trade
More Related Terms

Related Links

Economics Basics - Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
Current Account Deficits: Government Investment Or Irresponsibility? - Deficit can be a sign of trouble for some countries, and of health for others. 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.

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