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

Stellenbosch Working Paper Series No. WP23/2008
 
Publication date: 2008
 
Author(s):
[protected email address] (Department of Economics, University of Stellenbosch)
[protected email address] (Department of Economics, University of Stellenbosch)
 
Abstract:

Trade is a critical component of economic growth in newly settled societies. This paper 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.

 
JEL Classification:

N17, E32, N77

Keywords:

Colonial trade, Cape of Good Hope, Dutch East India, Band-pass filter, Medium-term fluctuations, Business cycle, South Africa, Ships, Harvest cycles, Colonial economy

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14 October 2019
While incoming data on the global economy remains downbeat, the mood was lifted last week after progress was made on US-China trade talks and Brexit negotiations. On the domestic data front, mining and manufacturing data for August added to growing evidence that real GDP growth likely slowed significantly in 2019Q3 after the nice rebound recorded in...

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