The Influence of Economic Policy Uncertainty and Business Cycles on Fine Wine Prices

• Published in: Computational economics 2023-08, Vol.62 (2), p.589-608
• Main Authors: Ben Ameur, Hachmi, Le Fur, Eric, Pillot, Julien
• Format: Article
• Language: English
• Subjects: Asymmetry; Autoregressive models; Behavioral/Experimental Economics; Business cycles; Computer Appl. in Social and Behavioral Sciences; Economic aspects; Economic policy; Economic Theory/Quantitative Economics/Mathematical Methods; Economics; Economics and Finance; Impact analysis; Intelligence; International economic relations; Long term; Math Applications in Computer Science; Operations Research/Decision Theory; Prices; Prices and rates; Taxation; Time series; Uncertainty; Wine industry; Wineries; Wines
• ISSN: 0927-7099; 1572-9974
• DOI: 10.1007/s10614-021-10225-3

This study investigates the impact of both economic policy uncertainty (EPU) and business cycles on the fine wine market. We use a nonlinear autoregressive distributed lag model to measure the influence of these two variables on three major Liv-ex indices over the period 2005M01–2020M12. Our results are multiple. First, fine wine prices are relatively unaffected asymmetrically by EPU, while the economic cycle has a more pronounced asymmetric effect, especially in the short run. Second, uncertainty in Europe and the USA affect fine wine prices more than in China. Third, in the short term, fine wine prices react more strongly to changes in business cycles than to uncertainty. Finally, prices of the five first growths of Bordeaux are asymmetrically influenced by EPU, unlike of the rest of the most prestigious Bordeaux wines. The study also has implications for investment. We argue that a strong and professional strategic intelligence watch would help stakeholders in the secondary wine market to improve their returns, especially when European and US wines are involved. While short-runners should focus on information relative to changes in the business cycle, long-term investors would find it more interesting to closely monitor policy decisions liable to have long-term effects on wine prices (such as taxation, monetary measures…).