Daniel S. Hamermesh

James M. Johannes

Food Stamps represent nearly $11 billion of personal income in the United States. The coupons that are issued to represent the purchasing power available to recipients are also reserves for the commercial banking system. This study asks how closely these coupons are substitutable for what is usually considered as money, and how well Food Stamps function as a fiscal stabilizer (whether they increase consumption more than does ordinary income). The results, based on estimates for 1959-1981, suggest that Food Stamp coupons are perfectly substitutable for Ml, and a revised money-supply series including "Food Stamp Money" is included in an Appendix. Estimates of consumption functions indicate that the MPC out of income in the form of Food Stamps is higher than that out of ordinary income. Taken together, the results suggest that the Food Stamp program is an automatic fiscal and monetary stabilizer -- under its provisions, both the money stock and disposable income are increased during a recession

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