J-curve effect and exchange rate pass-through: an empirical investigation of the united states

The J-curve theory predicts that the balance of trade will initially deteriorate before improving after a currency depreciation. This article finds empirical evidence that some of the 1985-1987 trade balance deterioration can be attributed to this phenomenon. Import exchange rate pass-through was found to have decreased during the 1985-1987 dollar depreciation, mitigating the increase in the trade deficit