In finance, J curve is curve which is made for showing trade deficit and private equity trend. It is J shaped diagram which simplified the trend. When the trend is small fall and then rise very fast, then the position is j curve.
1. Depreciation of Currency
When the value of any country's currency is falling fastly, its import will be higher. Volume of import will decrease because we will buy less with same currency because our currency is depreciating fastly. At that time, our trade deficit will increase. Now foreigner can buy more from us because they can more at low price. So, our current account will go surplus. We can show this trend through j curve.
This position may be harmful for our economy. For example, in the area of medicine. Some important medicine are imported. When our currency will weak, we have to pay more. Due to this, life saving medicine cost will increase. So, devaluating own currency is not good policy. Instead of decreasing the value of currency, every country's people do best for strong the value of their currency. For this, they have to decrease the level of corrupt and decreasing the cost of product. There are also other ways for improving trade deficit, we have to use other instead of devaluating own currency.
2. Private Equity
In the beginning time when we invest our money in private equity, our return on investment will be negative. We can show it in the graph paper. But after some time, our ROI will increase fastly because our cost of investment will decrease, so earning will increase on same level of investment. So, this trend can be shown in j curve.
1. Depreciation of Currency
When the value of any country's currency is falling fastly, its import will be higher. Volume of import will decrease because we will buy less with same currency because our currency is depreciating fastly. At that time, our trade deficit will increase. Now foreigner can buy more from us because they can more at low price. So, our current account will go surplus. We can show this trend through j curve.
This position may be harmful for our economy. For example, in the area of medicine. Some important medicine are imported. When our currency will weak, we have to pay more. Due to this, life saving medicine cost will increase. So, devaluating own currency is not good policy. Instead of decreasing the value of currency, every country's people do best for strong the value of their currency. For this, they have to decrease the level of corrupt and decreasing the cost of product. There are also other ways for improving trade deficit, we have to use other instead of devaluating own currency.
2. Private Equity
In the beginning time when we invest our money in private equity, our return on investment will be negative. We can show it in the graph paper. But after some time, our ROI will increase fastly because our cost of investment will decrease, so earning will increase on same level of investment. So, this trend can be shown in j curve.
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