VAR Model Analysis of Energy Consumption, CO2 Emissions, Financial Development, and Economic Growth in Honduras (1980-2022)

Abstract

This study analyzes the interrelationship between economic growth (GDP), per capita electricity consumption (EC), per capita CO2 emissions (CO2), financial development (FD), and government expenditure as a percentage of GDP (GOV) in Honduras during the period 1980-2022. Using a VAR model, the temporal dynamics among these variables are evaluated, as well as their cointegration, Granger causality test, impulse response, and variance decomposition. The results show a close relationship between energy consumption, economic growth, and emissions, with significant implications for the country’s sustainable devel- opment. This study contributes to the understanding of economic- environmental interactions in the context of a developing economy and provides practical insights for designing public policies that integrate environmental sustainability and economic growth.