In this paper we use a general equilibrium model with heterogeneous agents to assess the macroeconomic and welfare …-crisis level, postponing debt stabilization for two decades would entail a permanent output loss of about 17 percent and a welfare … loss of almost 7 percent of lifetime consumption. Moreover, the long-run welfare gains from the adjustment would more than …

programs to study the macroeconomic and intergenerational welfare effects caused by risk premium shocks and government debt … premium leads to substantial output contraction and negative welfare effects. Next, we quantify the effects of reducing the …-based reform in terms of income in the short run, but becomes dominant in the long run. The welfare effects vary significantly …

welfare of the economy. Fiscal consolidation has contractionary effects on economy in the short run, whereas it has positive … spending improves social welfare. Importantly, as the size of debt-reductions is larger and as the government reduces its debts … at a higher speed, the welfare improves more. …

welfare of the economy. We show that fiscal consolidation has contractionary ef- fects on the economy in the short run, but … cuts improves social welfare and attains larger welfare gains than consolidation that com- bines a tax increase with … reduction increase, welfare improves even further. …