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


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.

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Article provided by Cambridge University Press in its journal European Review of Economic History.

Volume (Year): 14 (2010)
Issue (Month): 03 (December)
Pages: 469-503

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Handle: RePEc:cup:ereveh:v:14:y:2010:i:03:p:469-503_00
Contact details of provider: Postal: Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK
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