We investigate the impact of major wars and pandemics on supply and demand dynamics in G7 economies since the 1800s. Using a neoclassical synthesis framework, we decompose real GDP per capita into trend (supply) and cyclical (demand) components via univariate filters and unobserved-components models. Country-specific local projections reveal that catastrophic events primarily and persistently damage the supply side, with wars causing large, long-lasting losses in productive capacity. Demand-side effects are generally smaller and more short-lived. However, no uniform G7 response exists; effects vary considerably in direction, magnitude, and persistence across countries. These differences are amplified by how shocks are measured-binary indicators versus intensity-based metrics-highlighting the importance of shock severity. By disentangling channels and incorporating heterogeneity, our analysis underscores the need for tailored, country-specific stabilization and reconstruction policies.
Donadelli et al. (Wed,) studied this question.