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Stephen Bazen and Jean-marie Cardebat
''Why have Bordeaux wine prices become so difficult to forecast ?''
( 2022, Vol. 42 No.1 )
In an earlier article, we found that a univariate state space time series model estimated using the Kalman filter provided reasonably accurate monthly forecasts of generic Bordeaux red wine prices for the period up to 2016. We use the same model to forecast prices for the period 2017 to 2020, a period in which the market for this wine was subject to a number of demand and supply shocks. We find that the model's forecasts are poor from late 2018 through 2019 when the price collapsed from an all-time high and returned levels not seen since 2012. There is evidence of a structural break or regime change, and we explore the underlying reasons for this. The main one is the collapse in Chinese demand for Bordeaux wines which was brought about by a combination of shocks.
Keywords: Wine prices, forecasting
JEL: Q1 - Agriculture: General
C5 - Econometric Modeling: General
Manuscript Received : Aug 26 2021 Manuscript Accepted : Feb 20 2022

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