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Keeping faith in the J curve

Editorial by Ludovic Subran, Chief Economist Euler Hermes.

In economics, the J curve describes the effect of a depreciation of the exchange rate on the trade balance over time. At the outset, the idea is simple: following the depreciation of a country’s currency, the price of imports increases and the price of exports decreases; the current account balance worsens, and we reach the trough of the J. Since domestic products have become more competitive, exports pick up and, at the same time, imports decrease because foreign products are now more expensive. The current account balance recovers and surpasses its starting point, or the bar of the J...

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Economic Outlook 1199 :

Mardi 3 Décembre 2013

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