International transmission of inflation in the commodity market during crises: evidence based on a multi-layer local Gaussian correlation network

This study develops a multi-layer local Gaussian correlation network approach to examine crisis-specific commodity – inflation linkages across the G7 and E7 economies. The empirical results show that mean inflation correlations between the E7 and G7 are lower than within-group correlations, suggesting differences in inflation co-movements between advanced and emerging economies. Energy – inflation linkages are generally stronger than both cross-country inflation linkages and agricultural commodity – inflation associations, with all correlations rising noticeably during major global crises. These patterns also display clear quantile heterogeneity. At the low inflation quantile, commodity – inflation linkages are relatively broad-based across the G7 and E7 economies, whereas they become denser and more concentrated at higher inflation quantiles. Major crises also reshape the network structure in distinct ways. The 2008 crisis is marked by the central role of agricultural commodities, the COVID-19 pandemic by a more balanced energy – agriculture pattern, and the 2022 Russia – Ukraine war by the prominence of the Russia – natural gas linkage. Overall, the results suggest that commodity – inflation linkages are shaped jointly by inflation regimes, commodity characteristics, and crisis-specific structural shocks. The findings also provide useful implications for policymakers in designing tailored response strategies that take account of quantile-dependent risks and event-driven vulnerabilities in global commodity markets.