Comment on Jessie’s Blog

Comment:Jessie, this blog post is done very well.  Good Job.  It made the J Curve idea really easy to understand.  Although, you did not talk about whether or not this idea is just a theory or if it is a concept that is evident in many different economies.  Some more real world examples would help.  Overall, though, I thought this blog post was done very, very well.  It really simplified the concept making it very easy to understand! GOOD JOB!

Jessie’s Blog Post:

Things get worse before they get better

December 8, 2010 by 11smitje

People are worried that even though the UK is trying to  rebalance its payments by increasing exports, but currently its imports are increasing at 5 times the rate of their exports. This is because of the J-curve idea. Initially when a currency depreciate, imports become more expensive but exports do not increase, making the currency worse off. This is because domestic firms are already contracted to importing and cannot change, so they must buy the expensive imports until they can renegotiate their contracts. Also, the world firms are already contracted to previously cheaper countries, so it will take time for them to get contracted with the U.K. Although it seems like Things are getting worse, as people are buying expensive imports and exports have not increased. However, given time the economy, in theory, will improve.