Econometric Models for Gross Domestic Product in Honduras

Abstract

— Gross Domestic Product or GDP is still considered to be the known go-to yardstick for determining how the economy of a country is doing, and that is still accountable for the economy of Honduras as well. Yet the country has only seen a handful of data-driven econometric studies, which limits the congress’ ability to rely on hard evidence when crafting their future economic plans. With that gap in mind, this project uses two different econometric techniques: a log-log model run through Ordinary Least Squares (OLS) and a Vector Autoregression (VAR) approach-to tease insights from the numbers. It pulls together yearly data from 2000 to 2023, looking at the different macroeconomic variables such as private and public spending, gross fixed investment, exports, imports, foreign direct investment, and the remittances that so many families and households depend on. Standard checks such as the Augmented Dickey-Fuller or ADF unit root test, Granger causality, lag length selection, inverse root stability, and a battery of residual diagnostics-were all run to make sure the results were trustworthy and stable. These tests show that GDP moves tightly with both domestic and international drivers, backing up the models forecast power.