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The significance of the Cape trade route to economic activity in the Cape Colony: a medium-term business cycle analysis

Published online by Cambridge University Press:  04 August 2010

WILLEM H. BOSHOFF
Affiliation:
Department of Economics, University of Stellenbosch, Private Bag X1, Matieland, Republic of South Africa, 7602, johanf@sun.ac.za
JOHAN FOURIE
Affiliation:
Department of Economics, University of Stellenbosch, Private Bag X1, Matieland, Republic of South Africa, 7602, johanf@sun.ac.za
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Abstract

Trade is a critical component of economic growth in newly settled societies. This article tests the impact of ship traffic on the Cape economy using a time-series smoothing technique borrowed from the business cycle literature and employing an econometric procedure to test for long-run relationships. The results suggest a strong systematic co-movement between wheat production and ship traffic, with less evidence for wine production and stock-herding activities. While ship traffic created demand for wheat exports, the size of the co-movement provides evidence that ship traffic also stimulated local demand through secondary and tertiary sector activities, supporting the hypothesis that ship traffic acted as a catalyst for growth in the Cape economy.

Type
Research Article
Copyright
Copyright © European Historical Economics Society 2010

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