The role of macro price policy – foreign exchange rates, interest rates, wage rates, and, indirectly, the rural-urban terms of trade (or “food prices,” for short) – influencing the rate and composition of structural change in an economy has been emphasized recently as a major component of agricultural and food policy (Timmer, Falcon, and Pearson), but empirical measurement of factors influencing structural change has largely ignored these price variables. The two oil price shocks of the 1970s offer an opportunity to model a major perturbation as it ripples through the macroeconomy and into the agricultural sector. No other single macreconomic event in recent history has so opened windows of opportunity for understanding cause-and-effect relationships between the food and agricultural sector and basic macro price variables. This study creates a model in which macro price variables are accounted for and applies it to the experience of seven Asia-Pacific developing countries from 1960 to 1980.
