Compounding Commodity Shocks and Household Nutrition: A Dynamic Model of Fertilizer Price Pass-Through and Expenditure Crowding-Out During the Russia-Ukraine War

This paper studies how the Russia-Ukraine war transmitted to household nutrition and welfare in low and middle-income countries through two simultaneous channels: a fertilizer input-cost shock that raised staple food prices, and a broader commodity price shock that crowded out non-food household expenditure. Existing literature typically treats these as separate shocks. This paper models them as a joint household budget squeeze using a dynamic Stone-Geary household optimization framework with a countryvarying borrowing constraint, and evaluates the mechanism against real, directly measured fertilizer and metals price data from the World Bank Commodity Markets Outlook, fertilizer trade-dependence data from UN Comtrade, and food and non-food consumer price divergence for Nigeria and Malawi. The fertilizer shock measured directly from the data peaked at 193 percent above its pre-shock baseline in April 2022 and was both larger and more persistent than the accompanying metals shock. Nigeria and Malawi are shown to sit at opposite extremes of direct Russia and Belarus fertilizer dependence, with Nigeria’s exposure concentrated almost entirely in potassium chloride imports. A calibrated simulation of the household model, run on the real shock series, finds that both countries’ financial buffers were exhausted well before the shock peaked, and that Malawi’s borrowing constraint bound for more months than Nigeria’s despite far lower direct supplier-country exposure, consistent with the paper’s central claim that global price transmission and financial buffer capacity jointly determine welfare loss independent of direct trade exposure. The paper reports this as a working result: a known limitation in the current consumption-allocation rule used in the simulation is identified and a methodological correction is specified before the point estimates can be treated as final.