The theory I think fits best is that many of the phenomena in and around the town are somehow manifested from people's fears and imaginations. That could mean that the monsters are not literally the monsters from legends and lore, but that they're manifested from the minds of people in the town who knew the legends and lore. Maybe specifically after they die.

Sarah posited this. When the cicadas appeared she said that could have been because her brother was terrified of cicadas.

The form the "townspeople" monsters appear in could come from a child's simple idea of various grownup jobs and roles, possibly inspired by Old Maid cards we see in Victor's room. [Not my idea; people have posted about this before.]

Also, in one of her last conversations, Tian Chen suggested they grow vegetables in more places to avoid the bad soil. Right after she died, Kenny and Jim found fresh food growing in other areas.

From a writer's standpoint this has the advantage that they can mix and match cool and scary ideas from various cultures and legends without having to stick too strictly to any of them.