In economics, the J-curve effect is an increase in the value of imports or a fall in the value of exports caused by a depreciation of a domestic currency. In the long term, it is expected that the falling value of the currency will make exports more competitive, causing them to increase, and imports more expensive, causing demand for them to fall. However, in the short term import and export volumes will usually be slow to adjust, so that imports will cost more in the depreciated currency and exports will earn less; the resulting decline in the balance of payments is represented by the hook of the J. The subsequent fall in imports and rise in exports causing the balance of payments to rise sharply is represented by the upstroke of the J. Research J-Curve Effect
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Matt and Leela Probert
Abbreviations
Research J-Curve Effect
