Supply-side or demand-side? Assessing the economic impact of pandemics and wars on G7 countries since the 1800s

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.