The J Curve phenomenon explains why the trade deficit may get worse after devaluation before recovering later

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The J Curve phenomenon suggests that after a currency is devalued, initially the trade deficit may worsen before recovering later. This is because in the short-term, the demand for imports is inelastic, meaning that the quantity of imports demanded does not change much with a change in price. However, over time, as domestic production becomes more competitive and exports become cheaper, the demand for exports grows and the deficit begins to improve. This creates a J-shaped curve when plotted on a graph, hence the name J Curve phenomenon.

The J Curve Phenomenon Explains Why the Trade Deficit May