J Curve Definition
A ‘J Curve’ is an economic theory that depicts that shortage in the balance of trade of a country initially worsens after devaluation of its currency occur. 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.
‘J Curve’ refers to a situation where the ‘J curve’ shape on a country’s trade balance declines before it gradually moves away from the negative status to a bit higher level. The ‘J Curve’ theory states that a country’s balance of trade worsens after a depreciation of its currency but gradually recovers to a better level than it was initially. The ‘J Curve’ theory is a reflection of how the depreciation of a country’s currency affect the country’s balance of tradeadversely before it gradually recovers to a higher level than it was before. 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. .
References for J-curve
- https://corporatefinanceinstitute.com › Resources › Knowledge › Economics
- https://www.economicshelp.org › Economics help blog › economics
Research articles for J-curve
Bilateral J–curve between US and her trading partners, Bahmani-Oskooee, M., & Brooks, T. J. (1999). Review of World Economics, 135(1), 156-165.
Neoclassical growth, the J curve for abatement, and the inverted U curve for pollution, Selden, T. M., & Song, D. (1995). Journal of Environmental Economics and management, 29(2), 162-168.
Devaluation and the J–curve: some evidence from LDCs, Bahmani-Oskooee, M. (1985). The review of Economics and Statistics, 500-504.
Coronary flow reserve and the J curve relation between diastolic blood pressure and myocardial infarction., Cruickshank, J. M. (1988). Bmj, 297(6658), 1227-1230.
The J–curve: a literature review, Bahmani-Oskooee*, M., & Ratha, A. (2004). Applied economics, 36(13), 1377-1398.
J–curve revisited: an analysis of blood pressure and cardiovascular events in the Treating to New Targets (TNT) Trial, Bangalore, S., Messerli, F. H., Wun, C. C., Zuckerman, A. L., DeMicco, D., Kostis, J. B., & LaRosa, J. C. (2010). European heart journal, 31(23), 2897-2908.
The J–curve phenomenon and the treatment of hypertension: is there a point beyond which pressure reduction is dangerous?, Farnett, L., Mulrow, C. D., Linn, W. D., Lucey, C. R., & Tuley, M. R. (1991). Jama, 265(4), 489-495.
A likely explanation for the J–curve of blood pressure cardiovascular risk, Kannel, W. B., Wilson, P. W., Nam, B. H., D’Agostino, R. B., & Li, J. (2004). The American journal of cardiology, 94(3), 380-384.
[PDF] Exchange rate and trade balance in East Asia: is there a J–curve, Onafowora, O. (2003). Economics bulletin, 5(18), 1-13.