International food price swings and their consequences for the Chinese economy

This paper examines the effects of international food price spikes caused by supply disruptions on China's economy. Existing literature recognizes food supply shocks as key drivers of global price volatility but offers limited insight into their impact on China's macroeconomy. Using a proxy Bayesian Vector Autoregression model with food supply shocks as an instrumental variable, we find that these shocks act as negative supply shocks, raising inflation, reducing output, and triggering monetary policy tightening in China. While the inflationary impact is consistent across economic states, the contractionary effect on economic activity is mainly concentrated in expansionary periods. Our results are robust across various model specifications, including larger structural VAR models. Time-varying analysis shows that inflationary effects have weakened over time, while output effects have strengthened. These findings enhance understanding of how global food supply shocks propagate to China and provide valuable guidance for policymakers managing economic disruptions post-2020.