How external policy shock influences domestic agricultural product prices: The case of containment policy

Containment policies are commonly adopted by governments in response to public health emergencies, yet their spillover effects on domestic agri-food markets remain underexplored. This study investigates how external containment policies, as a form of public health response, influence domestic agricultural product prices. This study takes the COVID-19 pandemic as a case to examine both external and internal containment policies and their impact on agricultural product prices, focusing on underlying transmission mechanisms and policy effects. We employ a composite containment policy index from the OxCGRT and construct a three-dimensional panel dataset covering 95 markets in 23 countries from January 2020 to December 2021. Using a multi-way fixed effects model, we find that external containment measures significantly increase agricultural product prices. In the short term, the effects are more pronounced in importing countries, while in the long term, both importers and exporters are broadly affected. Developing countries are more vulnerable to external policy shocks, and price volatility is greater for cereals than for non-cereal products. Containment policies can influence prices through both demand- and supply-side channels, including restrictions on human mobility and disruptions to agri-food supply chains. Furthermore, well-coordinated and carefully designed policy combinations can help mitigate the negative impacts of price shocks. By situating COVID-19 within the broader context of global public health policy shocks, this study offers generalizable empirical evidence and policy insights into how external containment responses affect domestic food price stability and agri-food system resilience.