Inflation spillover effect of agricultural sector and its formation mechanism between China and the countries along the Belt and Road

This paper employs a dynamic network approach and a time-varying spillover index model to quantitatively assess the inflation spillover effects within the agricultural sectors between China and the Belt and Road Initiative (BRI) countries. Our findings reveal that there is a strong overall interconnectedness in the agricultural inflation among BRI countries, with the total spillover index exhibiting a rapid increase from 2011 to 2013, followed by a gradual decline. Notably, China transitioned from being a net recipient to a net contributor of inflation spillovers in June 2012. The net spillover influence of China appears to be more pronounced in Southeast Asia, while its interactions with Central and Eastern European countries exhibit a pattern of alternating strength. Mechanism tests suggests that international trade, capital flows, and market sentiment are closely associated with agricultural inflation spillovers between China and BRI countries. Heterogeneity analysis indicates that for countries along the Maritime Silk Road and developed nations, spillovers predominantly occur through trade and capital flow channels, whereas sentiment factors play a more significant role in countries along the Land Silk Road and developing nations. Moreover, a floating exchange rate regime and robust institutional quality can provide some insulation against inflation. Finally, China’s progress in high-quality agricultural development is associated with a reduced level of outward spillovers.