Macro Prices and Structural Change: Discussion

Abstract

Timmer's paper addresses an important set of issues often ignored by sectorally oriented agricultural economists. He wants to investigate the impact of changes in macro prices on the intersectoral terms of trade and a particular agricultural sector performance indicator, namely the sectors share of Gross Domestic Produlct (GDP). The model is constructed using data from seven Asia-Pacific developing countries and is then used to simulate the impacts of an international oil price increase. The basic hypothesis is that oil prices affect agriculture through the impacts of exchange rates on the intersectoral terms of trade. Because agriculture produces a relatively larger share of tradable goods, oil price increases cause an improvement in the intersectoral terms of trade in importing countries. The opposite occurs in oil-exporting countries. Therefore, Timmer expects and gets differential impacts on the performance of agricultural sectors.