When the value of a currency drops, the price of imports will increase proportionally since the foreign exporters will still demand the same value for their goods. For example, if the dollar dropped such that it was worth half as many Yen, a Japanese exporter would demand double the number of dollars for the same product (since the relative price of his Japanese inputs would remain the same). But the people of America would still have the same number of dollars after the devaluation as they did before, so firms that depend on imports would substitute away from the suddenly expensive imported goods to the now-cheaper domestic goods. Since such substitution takes time as infrastructure is modified and channels of trade are broken and re-established, firms will initially be forced to stay with the expensive inputs until substitution becomes a viable possibility. Therefore, in the short run, the balance of trade will suffer as firms and individuals cannot afford as many imports. But in the long run, a country will patronize domestic goods over foreign goods, and that will result in increased trade since fewer resources are leaving the country and more are supporting domestic industry. The combination of short-run decrease and long-run increase in trade is what shapes the aptly-named J-curve.

          |                           @         
          |                          @          
 Balance  |                         @           
 of Trade |                        @            
          |                       @             
          |                     @@              
          |                   @@                
          |@              @@     Time after     
          | @           @@       devaluation    
          |  @@@     @@@                        
          |     @@@@@                           

Log in or register to write something here or to contact authors.