![]() ![]() ![]() The activity of shadow banks is associated with high risk and through linkages with banks they can destabilize the entire financial system of the country in the event of bankruptcy. Although shadow banking institutions operate like banks, they are not the subject of registration and prudential regulation as banks. negative aspects of their functioning can be distinguished. Shadow banks perform a lot of essential economic and social functions. In practice, it is difficult to draw the line separating banks and shadow banking institutions. Shadow banking institutions offer products which partly replace banking transactions and partly complete a banks’ offer. In Canada, competition between plants is enough to deter local investments, the availability of feedstock is important in determining plant location, and the effects of policy support for wheat-based plants are significant (Lin and Yi, 2012a).įor several years, the expansion of the shadow banking sector in the world can be observed. In Europe, competition between plants deters local investments and ethanol support policies encourage investments (Lin and Yi, 2012b). We also find that in the United States state producer tax credits and the federal MTBE ban have a positive effect on ethanol investment (Lin and Thome, 2012). We also find that availability of feedstock is important in determining plant location. According to our results, we find that, in the United States, competition between plants is enough to deter local investments. In Lin and Yi (2012a,b), we estimate a model of the investment timing game in ethanol plants worldwide that allows for the choice among different feedstocks. This model follows my previous work estimating a structural econometric model of the multi-stage dynamic investment timing game in offshore petroleum production (Lin, 2012). In Lin and Thome (2012), we estimate a model of the investment timing game in corn ethanol plants in the United States. The results of my research will help determine which policies and factors can promote fuel-ethanol industry development. This chapter reviews some of the papers I have written analyzing what factors affect the decision to invest in building new ethanol plants using a dynamic structural econometric model of the investment timing game. There are 191 fuel-ethanol plants in the ROW, which is a little more than in the U.S., and 82% of them were built after 2005. Ethanol-producing countries in the ROW include Brazil, Canada, China, and Thailand, as well as countries in Europe. Even when excluding the U.S., which was the country with the largest fuel-ethanol production in 2009, the fuel-ethanol industry has been growing rapidly in the rest of the world (ROW). All these factors have coincided with investment in the industry in recent years. Additionally, politicians have pushed for ethanol as an environmentally friendly alternative to imported oil, as well as a way to boost farm profits and improve rural livelihoods. Several government policies actively promote ethanol production via tax incentives and mandates. Recently the support of biofuel production has been a politically sensitive topic. ![]()
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