Buffer or Conduit? Global Agri‐food Value Chains and Food Price Transmission

Abstract

In an era of volatile global markets, stabilizing domestic food prices has become increasingly critical. This paper examines how participation in global agri‐food value chains (GVCs) influences food price transmission through a robust two‐step regression framework. First, we estimate country‐specific long‐run pass‐through (LRPT) coefficients for 173 countries over four separate episodes between 2000 and 2022, quantifying the extent to which changes in international food prices lead to changes in domestic consumer food prices. Then, we regress these estimates on distinct measures of GVC participation: intermediate (two‐sided or mixed) participation versus pure backward or forward trade (reflecting participation in later and earlier stages of production, respectively). Our findings reveal that nations with intermediate GVC participation experience a significant reduction in the transmission of price shocks, while those focused solely on backward or forward trade exhibit greater transmission of international food price shocks. These results challenge the dominant view that deeper global integration invariably increases the transmission of international food price shocks and highlight the potential of intermediate positioning as an effective policy tool for stabilizing domestic food prices. This study provides valuable insights for trade policy design and contributes to the broader discourse on food security.