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

Marthe Mareels

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

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.

Pages: 33 pages
Date: 2026-07
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:26/1147

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