J Curve

DEFINITION of 'J Curve'

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.

BREAKING DOWN '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 TERMS
  1. Trade Deficit

    An economic measure of a negative balance of trade in which a ...
  2. Current Account Deficit

    A measurement of a country’s trade in which the value of goods ...
  3. Balance Of Trade - BOT

    The difference between a country's imports and its exports. Balance ...
  4. Dollar Drain

    When a country imports more goods and services from another country ...
  5. Terms of Trade - TOT

    The value of a country's exports relative to that of its imports. ...
  6. Currency Depreciation

    A decrease in the level of a currency in a floating exchange ...
Related Articles
  1. Markets

    The Pros & Cons of a Trade Deficit

    Is a trade deficit, also known as a current account deficit, beneficial or detrimental to a country's economy?
  2. Markets

    The Balance Of Trade

    The balance of trade is the difference between a country’s imports and exports. A trade deficit occurs when a country buys or imports more goods from other countries than it sells or exports. ...
  3. Markets

    Interesting Facts About Imports And Exports

    Imports and exports exert a profound influence on the consumer and the economy. Learn what affects these figures, and in turn how these figures affect the economy.
  4. Markets

    Current Account Deficit

    A current account deficit occurs when a country spends more money on the goods and services it imports than it receives for the goods and services it exports.
  5. Trading

    Main Factors That Influence Exchange Rates

    The exchange rate is one of the most important determinants of a country's relative level of economic health, and can impact your returns.
  6. Markets

    How Imports And Exports Affect You

    Imports are an important indicator of an economy’s health. In a healthy economy, exports and imports are both growing.
  7. Trading

    Top Economic Factors That Depreciate The $US

    A variety of factors contribute to currency depreciation, including monetary policy, inflation, demand for currency, economic growth and export prices.
  8. Trading

    6 Factors That Influence Exchange Rates

    An in depth look at out how a currency's relative value reflects a country's economic health and impacts your investment returns.
  9. Trading

    Understanding Currency Depreciation

    Currency depreciation occurs when a currency’s value falls in comparison to other currencies.
  10. Markets

    What's the Balance of Trade?

    The balance of trade is the difference between the value of all the goods and services a country exports and the goods and services it imports.
RELATED FAQS
  1. What is a trade deficit and what effect will it have on the stock market?

    A trade deficit, which is also referred to as net exports, is an economic condition that occurs when a country is importing ... Read Answer >>
  2. What happens to the US dollar during a trade deficit?

    Learn what happens to the U.S. dollar during trade deficits. Trade deficits happen when imports exceed exports leading foreigners ... Read Answer >>
  3. What is the difference between a current account deficit and a trade deficit?

    Learn the meanings of the macroeconomic terms current account deficit and trade deficit, and understand the differences between ... Read Answer >>
  4. What are key benefits to a country that has engaged in a policy of currency depreciation?

    Learn about key benefits to a country engaging in a policy of currency depreciation, such as smaller trade deficits, employment ... Read Answer >>
  5. Why do some analysts argue that trade deficits aren't bad for the economy?

    Understand the reasons why trade deficits, reviled by many economic analysts, are not always a bad thing in the eyes of many ... Read Answer >>
  6. When has the United States run its largest trade deficits?

    Learn in what year the United States ran its largest negative balance of trade as a result of imports greatly exceeding the ... Read Answer >>
Hot Definitions
  1. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  2. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  3. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  4. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  5. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  6. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
Trading Center