A Regional Computable General Equilibrium Model for Honduras: Modeling Exogenous Shocks and Policy Alternatives

36 Pages Posted: 20 Mar 2013

See all articles by Samuel Morley

Samuel Morley

International Food Policy Research Institute (IFPRI)

Valeria Pineiro

A member of the CGIAR Consortium - International Food Policy Research Institute (IFPRI)

Date Written: March 1, 2013

Abstract

In this paper we develop a dynamic regional computable general equilibrium (CGE) model for Honduras that incorporates regional disaggregated sectors for agriculture. We undertook this research to address two pressing policy concerns in Honduras. First, what growth strategy should the country follow, given its severe balance of payments constraint and dependence on remittances and the price of oil? Second, what would be the impact on growth of investments in projects to increase agricultural productivity, given the importance of agriculture to the rural poor and to the Honduran economy? Our model extends previous modeling work on Honduras in several ways. First, it develops an updated regional social accounting matrix for 2008, coupled with an updated CGE model. Second, the CGE is a recursive, dynamic model that incorporates unemployment in the short run. We specify a fixed minimum wage and an informal sector and use a recursive, dynamic framework to solve for the short-run adjustment process that occurs as the economy responds to external shocks. Third, the model is regional, permitting us to examine the impact of sectoral development policies, particularly those focused on the agricultural sector.

Keywords: Honduras, Central America, Latin America, North America, Computable General Equilibrium (CGE) model, economic development, macroeconomic impacts, shocks, economic policy

Suggested Citation

Morley, Samuel and Pineiro, Valeria, A Regional Computable General Equilibrium Model for Honduras: Modeling Exogenous Shocks and Policy Alternatives (March 1, 2013). IFPRI Discussion Paper 01252, Available at SSRN: https://ssrn.com/abstract=2235682 or http://dx.doi.org/10.2139/ssrn.2235682

Samuel Morley (Contact Author)

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

Valeria Pineiro

A member of the CGIAR Consortium - International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

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