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  • Ed 12 Jcurve

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    mithila debnath
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    The J curve shows that in the short run, a currency depreciation can worsen a country's balance of payments due to more expensive imports, represented by the downward "hook" of the J. However, in the long run depicted by the straightening of the line, the depreciation improves the balance of payments by making the country's exports cheaper and more competitive, shifting it into a surplus. The J curve can also be used to demonstrate how depreciation may cause a worsening of inflation as aggregate supply curves shift from higher import prices.

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    The J curve shows that in the short run, a currency depreciation can worsen a country's balance of payments due to more expensive imports, represented by the downward "hook" of the J. However, in the long run depicted by the straightening of the line, the depreciation improves the balance of payments by making the country's exports cheaper and more competitive, shifting it into a surplus. The J curve can also be used to demonstrate how depreciation may cause a worsening of inflation as aggregate supply curves shift from higher import prices.

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    11 views1 page

    Ed 12 Jcurve

    Uploaded by

    mithila debnath
    The J curve shows that in the short run, a currency depreciation can worsen a country's balance of payments due to more expensive imports, represented by the downward "hook" of the J. However, in the long run depicted by the straightening of the line, the depreciation improves the balance of payments by making the country's exports cheaper and more competitive, shifting it into a surplus. The J curve can also be used to demonstrate how depreciation may cause a worsening of inflation as aggregate supply curves shift from higher import prices.

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    © All Rights Reserved
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    ED 12: J Curve

    Best Uses:

     J curve shows the short run (hook on curve) effect of a currency depreciation causing a
    worsening of a balance of payments before the long run improvement occurs as the line
    straightens and moves in the direction of an improvement in the BoP into the surplus
    area indicated by the yellow dot diagram A below.

     Useful to connect with AS/AD as it can be used to show a worsening


    inflation situation in the economy as AS 1 shifts to AS 2 due to higher
    priced imports.

    SyllabusReference 3. 4: J curve effect (HL)

    What do you expect when a currency depreciates?

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