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The Long-Run Effects of Temporary Oil Supply Disruptions: Evidence for Hysteresis in European Countries

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  • Marthe Mareels

Abstract

This paper provides evidence that supply-driven oil price increases depress GDP for more than a decade after oil prices have returned to their pre-shock level. These hysteresis effects are driven by two channels: a contraction in investment, and a steady decline in labour force participation. In contrast, oil price decreases do not produce sustained economic gains, indicating asymmetric effects. A comparison with aggregate demand shocks suggests that hysteresis arises through common underlying mechanisms.

Suggested Citation

  • Marthe Mareels, 2026. "The Long-Run Effects of Temporary Oil Supply Disruptions: Evidence for Hysteresis in European Countries," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 26/1147, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:26/1147
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    File URL: http://wps-feb.ugent.be/Papers/wp_26_1147.pdf
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    References listed on IDEAS

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    3. Diego R. Känzig, 2021. "The Macroeconomic Effects of Oil Supply News: Evidence from OPEC Announcements," American Economic Review, American Economic Association, vol. 111(4), pages 1092-1125, April.
    4. Christiane Baumeister & James D. Hamilton, 2019. "Structural Interpretation of Vector Autoregressions with Incomplete Identification: Revisiting the Role of Oil Supply and Demand Shocks," American Economic Review, American Economic Association, vol. 109(5), pages 1873-1910, May.
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