The first known use of the term banana republic was by American author O. Henry in his 1904 book of linked short stories , Cabbages and Kings . The book is based on Henry 's 1896-97 stay in Honduras , while hiding from federal authorities for embezzlement in the United States . As a political science term banana republic is a descriptor first used by the American writer O. Henry in Cabbages and Kings ( 1904 ) , a book of thematically related short stories derived from his 1896 â `` 97 residence in Honduras , where he was hiding from U.S. law for bank embezzlement in the U.S.