nep-sea New Economics Papers
on South East Asia
Issue of 2008‒09‒29
twenty-one papers chosen by
Kavita Iyengar
Asian Development Bank

  1. China?s Exports in ICT and its Impact on Asian Countries By Xing, Yuqing
  2. A Panel Data Approach to the Contribution of Trade to the Growth of Selected East Asian Countries By Rao, B. Bhaskara; Singh, Rup
  3. The Asian crisis: what did local stock markets expect? By Jacob Gyntelberg; Alicia Garcia Herrero; Camilo Andrea Tesei
  4. Trade Expansion of China and India: Threat or Opportunity By Qureshi, M.S.; Wan, Guanghua
  5. Using The Artificial Neural Network (ANN) to Assess Bank Credit Risk: A Case Study of Indonesia By Maximilian J. B. Hall; Dadang Muljawan; Suprayogi; Lolita Moorena
  6. INDONESIA-E3: An Indonesian Applied General Equilibrium Model for Analyzing the Economy, Equity, and the Environment By Arief Anshory Yusuf
  7. Assessing production efficiency of Islamic banks and conventional bank Islamic windows in Malaysia By Kamaruddin, Badrul Hisham; Safa, Mohammad Samaun; Mohd, Rohani
  8. Efficiency and Malmquist Indices of Productivity Change in Indonesian Banking By Maximilian J. B. Hall; Mulinman D. Hadad; Wimboh Santoso; Ricky Satria; Karligash Kenjegalieva; Richard Simper
  9. Black hole or black gold ? the impact of oil and gas prices on Indonesia's public finances By Agustina, Cut Dian R.D.; del Granado, Javier Arze; Bulman, Tim; Fengler, Wolfgang; Ikhsan, Mohamad
  10. Import price dynamics in major advanced economies and heterogeneity in exchange rate pass-through. By Stéphane Dées; Matthias Burgert; Nicolas Parent
  11. Comparing Regional Development in China and India By Wu, Yanrui
  12. China and the Future of the Developing World: The Coming Global-Asian Era and its Consequences By Henderson, Jeffrey
  13. Banking Efficiency and Stock Market Performance: An Analysis of Listed Indonesian Banks By Maximilian J. B. Hall; Mulinman D. Hadad; Wimboh Santoso; Ricky Satria; Karligash Kenjegalieva; Richard Simper
  14. Macroeconomic Uncertainty and Performance in Asian Countries By Don Bredin; John Elder; Stilianos Fountas
  15. Linking Natural Gas Markets - Is LNG Doing Its Job? By Anne Neumann
  16. Volatility Dynamics in Foreign Exchange Rates: Further Evidence from the Malaysian Ringgit and Singapore Dollar By Kin-Yip Ho; Albert K Tsui
  17. Testing the Effectiveness of Monetary Policy in Malaysia Using Alternative Monetary Aggregation By Leong, Choi-Meng; Puah, Chin-Hong; Abu Mansor, Shazali; Evan, Lau
  18. Learning by Exporting and High-tech Capital Deepening in Singapore Manufacturing Industries, 1974-2006 By Aekapol Chongvilaivan
  19. Growth Oriented Macroeconomic Policies for Small Islands Economies: Lessons from Singapore By Chowdhury, Anis
  20. Currency Demand Modeling In Estimating The Underground Economy: A Critique on ‘Excess Sensitivity’ Method and Support for VAR Framework By Jerry Marmen Simanjuntak
  21. Feminization of Ageing and Long Term Care Financing in Singapore By Chia Ngee Choon; Shawna Lim Shi en; Angelique Chan

  1. By: Xing, Yuqing
    Abstract: This paper analyses China?s ICT exports growth in its two major markets Japan and the US from 1992 to 2004. It focuses on ICT products classified in SITC 75, 76 and 77. The empirical results show that Chinese exports had maintained two-digit annual growth during the period. The growth was much higher than the corresponding growth of the overall markets. By 2004, Chinese ICT exports accounted for 26 per cent of the total Japanese imports and 19 per cent of the total imports of the US in ICT products. In addition, the paper investigates whether the rapid growth of Chinese ICT exports crowded out that of other Asian countries: Indonesia, Malaysia, Philippines, Singapore, South Korea and Thailand. The empirical analysis shows that the crowding out effect differs across countries and products. The exports of Singapore and Philippines have been negatively affected by the growth of Chinese exports, but no crowding effect existed at all with Indonesia?s exports.
    Keywords: China, exports, ICT, Asia
    Date: 2008
  2. By: Rao, B. Bhaskara; Singh, Rup
    Abstract: Panel data methods are used to estimate the contribution of openness of trade to the long term or the steady state rate of growth of output (SSGR) of selected East Asia countries viz., Singapore, Malaysia, Thailand, Hong Kong, Korea and the Philippines. Since SSGR is unobservable, its estimates are derived by estimating modified production functions and by imposing the equilibrium conditions of the Solow (1956) growth model. Panel cointegration tests showed that there is a well defined long run relation between output, trade ratio and capital. Growth accounting exercise showed that factor accumulation is the dominant contributor to the SSGR of this region. Openness of trade, however, has made a significant contribution to SSGR by 1999-2003.
    Keywords: Panel unit root and cointegration tests; Trade Openness; Total Factor Productivity and East Asian Countries.
    JEL: C23 N15
    Date: 2008–09–20
  3. By: Jacob Gyntelberg; Alicia Garcia Herrero; Camilo Andrea Tesei
    Abstract: In this paper we investigate whether cross-sectional information from local equity markets contained information on devaluation expectations during the Asian crisis. We concentrate on the information content of equity prices as these markets were in general the largest and most liquid at the time and, thus, presumably the best carriers of information. Using an event-study approach for the period leading up to each of the devaluations which occurred during the Asian crisis (namely those of Indonesia, Korea, Malaysia, the Philippines and Thailand), we compare returns in the equity prices of exporting and non-exporting firms. This is based on the assumption that the expectation of a devaluation should help the stock of exporting firms outperform those of non-exporting firms. Overall we do find some evidence supporting this hypothesis, although at different degrees depending on the country. Our second finding is that local equity market prices, as reflected in the different patterns seen for exporters and non-exporters, did to at least to some extent price in the possibility that the Thai devaluation would be followed by other countries in the region.
    Keywords: Asian crisis, currency crisis, information content of local equity prices
    Date: 2008–09
  4. By: Qureshi, M.S.; Wan, Guanghua
    Abstract: By exploring the export performances and specialization patterns of China and India, we assess their trade competitiveness and complementarity vis-.-vis each other as well as with the rest of the world. Our analysis indicates that (i) India faces tough competition from China in the third markets especially in clothing, textile and leather products; (ii) there is a moderate potential for expanding trade between the two countries; (iii) China poses a challenge for the East Asian economies, the US, and most of the European countries especially in medium technology industries; (iv) India appears to be a competitor mainly for its neighbouring South Asian countries; and (v) complementarity exists between the imports of China and India, and the exports of the US, some European states and East Asian countries, especially Japan, Korea, Malaysia, Singapore and Thailand, implying opportunities for trade expansion; and finally (vi) the export structure of China is changing with the exports of skill intensive and high technology products increasing and those of labour-intensive products decreasing gradually. This suggests that challenges created by China in traditional labour-intensive products might reduce in the long run
    Keywords: international trade, export competition, China, India
    Date: 2008
  5. By: Maximilian J. B. Hall (Dept of Economics, Loughborough University); Dadang Muljawan (Central Bank of Indonesia); Suprayogi (Industrial Engineering Program, Bandung Institute of Technology, Indonesia); Lolita Moorena (Central Bank of Indonesia Internship program, Bandung Institute of Technology, Indonesia)
    Abstract: Ever since the Asian Financial Crisis, concerns have risen over whether policy-makers have sufficient tools to maintain financial stability. The ability to predict financial disturbances enables the authorities to take precautionary action to minimize their impact. In this context, the authorities may use any financial indicators which may accurately predict shifts in the quality of bank exposures. This paper uses key macro-economic variables (i.e. GDP growth, the inflation rate, stock prices, the exchange rates, and money in circulation) to predict the default rate of the Indonesian Islamic banks’ exposures. The default rates are forecasted using the Artificial Neural Network (ANN) methodology, which incorporates the Bayesian Regularization technique. From the sensitivity analysis, it is shown that stock prices could be used as a leading indicator of future problem.
    Keywords: default risk, artificial neural network, Bayesian regularization, transition matrix.
    JEL: E25 G32 C63 E27 C11
    Date: 2008–07
  6. By: Arief Anshory Yusuf (Department of Economics, Padjadjaran University)
    Abstract: INDONESIA-E3 is a CGE (Computable General Equilibrium) model built to analyze the Economy, Equity,and the Environment - the three inter-related aspects of sustainable development. It is a multi-sectors, multi-households CGE model that incorporate carbon emissions and taxation and with a strong feature in distributional analysis. It can be used, for example, to study the impact of environmental reforms, such as carbon emission reduction and energy pricing policy, has on inequality and poverty for the case of Indonesia. The model captures the inter-dependence among markets in the determination of both price of commodities and factor of productions and how it will affect distribution of income. As a departure from the previous literature, the disaggregation of household by expenditure classes allows for precise estimates of the distributional impact and poverty incidence. This paper describes the model structure such as production and consumption structure, database, parameters, method for distributional analysis, possible closures, and and method for sensitivity analysis.
    Keywords: INDONESIA-E3, Computable General Equilibrium, Equity, Environment
    JEL: C68 D58
    Date: 2008–09
  7. By: Kamaruddin, Badrul Hisham; Safa, Mohammad Samaun; Mohd, Rohani
    Abstract: This study presents new perspectives on performance evaluation of Islamic banking operations in Malaysia, by investigating for the first time, both cost and profit efficiency of full-fledged Islamic banks and Islamic window operations of domestic and foreign banks. The application of Data Envelopment Analysis (DEA) technique has provided several efficiency measures such as allocative, pure technical and scale efficiency that explain cost and profit efficiency differentials among banks. The findings of the study show that Islamic banking operators are relatively more efficient at controlling costs than at generating profits. The main contributor for cost efficiency of domestic and foreign banks comes from resource management and economies of scale respectively. These findings have implications on the reform process carried out in the aftermath of Asian financial crisis, particularly the Financial Sector Master Plan (FSMP).
    Keywords: Data Envelopment Analysis; allocative efficiency; technical efficiency; foreign banks
    JEL: D2
    Date: 2008–03–08
  8. By: Maximilian J. B. Hall (Dept of Economics, Loughborough University); Mulinman D. Hadad (Bank Indonesia, Jakarta, Indonesia); Wimboh Santoso (Bank Indonesia, Jakarta, Indonesia); Ricky Satria (Bank Indonesia, Jakarta, Indonesia); Karligash Kenjegalieva (Dept of Economics, Loughborough University); Richard Simper (Dept of Economics, Loughborough University)
    Abstract: In this study we utilise a non-parametric, slacks-based model (SBM) approach to analyse efficiency and productivity changes for Indonesian banks over the period January 2006 to July 2007. Efficiency scores and Malmquist productivity indices are estimated using the approach for efficiency and super-efficiency estimation suggested by Tone (2001, 2002). Additionally, the Malmquist indices are decomposed into technical efficiency change and technological shift components. Using monthly supervisory data provided by Bank Indonesia we find that, under the intermediation approach to efficiency estimation, average bank efficiency was reasonably stable during the sample period, ranging between 70% and 82%, with 92 of the 130 banks in existence at that time having efficiency scores of over 70%, including 10 with (super)efficiency scores above unity. We also find that technical efficiencies under the Intermediation approach to describing the banking production process are relatively stable. Malmquist results for the industry suggest that the main driver of productivity growth is technological progress. A strategy based on the gradual adoption of newer technology, according to our results, thus seems to have the highest potential for boosting the productivity of the financial intermediary operations of Indonesian banks.
    Keywords: Indonesian Finance and Banking; Productivity; Efficiency.
    JEL: C23 C52 G21
    Date: 2008–08
  9. By: Agustina, Cut Dian R.D.; del Granado, Javier Arze; Bulman, Tim; Fengler, Wolfgang; Ikhsan, Mohamad
    Abstract: Indonesia's oil revenues and fuel subsidies dominate the nation's economic policy agenda. This paper estimates the impact of higher international oil prices on the Indonesian government's fiscal position in 2008 and beyond. It analyzes the interactions between government revenues and expenditures, as well as international oil prices, energy subsidies, and inter-governmental transfers. Looking at the impact of oil prices over US$100 per barrel, the paper presents five main findings. First, despite record high oil prices, the government's oil and gas revenues have been decreasing relative to non-oil and gas revenues since 2001. Second, fuel subsides will reach record levels in 2008 while electricity subsidies have been increasing even faster. Third, the paper finds that most of the fuel subsidy that directly benefits households goes to the richest 20 percent. Fourth, even at levels above US$100 per barrel, the government receives more revenues from oil and gas than it spends on energy subsidies. However, due to significant revenue-sharing with sub-national governments, high oil prices are net-negative for the central government, while they create fiscal windfalls for many regions. Finally, the oil sector's positive impact on Indonesia's public finances declines as oil prices rise, because subsidies and other expenditures outgrow oil and gas revenues.
    Keywords: Energy Production and Transportation,Oil Refining&Gas Industry,Markets and Market Access,Debt Markets,Energy and Environment
    Date: 2008–09–01
  10. By: Stéphane Dées (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Matthias Burgert (University of Frankfurt, House of Finance, Grüneburgplatz 1, D-60323 Frankfurt am Main, Germany.); Nicolas Parent (Bank of Canada, 234 Wellington Street, Ottawa, Ontario K1A 0G9, Canada.)
    Abstract: This paper aims at showing heterogeneity in the degree of exchange rate pass-through to import prices in major advanced economies at three different levels: 1) across destination markets ; 2) across types of exporters (distinguishing developed economy from emerging economy exporters); and 3) over time. Based on monthly data over the period 1991-2007, the results show first that large destination markets exhibit the lowest degree of pass-through. The degree of pass-through for goods imported from emerging economies is also significantly lower than for those from developed economies. Regarding the evolution over time, no clear change in pricing behaviours can be identified and particular events, like large exchange rates depreciations during the Asian crisis, seem to influence the degree of pass-through related to imports from emerging economies. JEL Classification: E31, F3, F41.
    Keywords: Pricing to Market, Exchange rate pass-through, Import price modeling.
    Date: 2008–09
  11. By: Wu, Yanrui
    Abstract: Economic growth in China and India has attracted many headlines recently. As a result, the literature comparing the two Asian giants has expanded substantially. This paper adds to the literature by comparing regional growth, disparity and convergence in the two economies. This is the first of its kind. The paper presents a detailed examination of economic growth in the regions of China and India over the past twenty years. It also provides an assessment of regional disparity in the two countries and investigates whether there is any evidence of regional convergence during the period of rapid economic growth. It attempts to identify the sources of regional disparity and hence draw policy implications for economic development in the two countries in the near future.
    Keywords: regional development, China, India, disparity, convergence
    Date: 2008
  12. By: Henderson, Jeffrey
    Abstract: The rise of China as an economic and political ?driver? of the global economy is likely to be one of the defining moments of world history. Its dynamism and international expansion are on the verge of creating a ?critical disruption? in the global order that has held sway for over 60 years. As such, China is beginning to reshape the world, presaging a new phase of globalization: a ?global-Asian era?. This new era is likely to be distinct from any of the earlier phases of globalization and China?s global footprint, in terms of its business, economic and political actions and their geopolitical implications, is likely to be markedly different from what has gone before. This paper offers a framework by which we can begin to understand the coming global-Asian era (GAE) and some of its consequences, particularly as the latter are surfacing in the developing world. Having discussed the nature and dynamics of the GAE, the paper turns to sketch a series of vectors (trade, aid and energy security) along which the GAE is beginning to impact on developing countries. The paper argues that, at least for these vectors, the Chinese-driven GAE is providing opportunities as well as dangers for national development projects. It concludes by briefly speculating on the viability of the GAE.
    Keywords: China, globalization, developing world, trade, oil, aid, geopolitics
    Date: 2008
  13. By: Maximilian J. B. Hall (Dept of Economics, Loughborough University); Mulinman D. Hadad (Bank Indonesia, Jakarta, Indonesia); Wimboh Santoso (Bank Indonesia, Jakarta, Indonesia); Ricky Satria (Bank Indonesia, Jakarta, Indonesia); Karligash Kenjegalieva (Dept of Economics, Loughborough University); Richard Simper (Dept of Economics, Loughborough University)
    Abstract: This paper examines the monthly efficiency and productivity of listed Indonesian banks and their market performance through the prism of two modelling techniques, efficiency and super-efficiency, over the period January 2006 to July 2007. Within this research strategy we employ Tone’s (2001) non-parametric, Slacks-Based Model (SBM) and Tone’s (2002) super-efficiency SBM combining them with recent bootstrapping techniques, namely the non-parametric truncated regression analysis suggested by Simar and Wilson (2007). In the case of the SBM efficiency scores, the Simar and Wilson methodology was adapted to two truncations, whereas in the super-efficiency framework the original technique was utilised. As suggested by neo-classical theory, we find that the stock market values banks in accordance with their performance. Moreover, it is found that the JCI index of the Indonesian Stock Exchange is positively related to bank efficiency. Another interesting finding is that the coefficient for the share of foreign ownership is negative and statistically significant in the super-efficiency modelling. This suggests that Indonesian banks with foreign ownership tend to be less efficient than their domestic counterparts. Finally, Malmquist productivity results suggest that, over the study’s horizon, the sample banks displayed volatile productivity patterns in their profit-generating operations.
    Keywords: Indonesian Banking, Emerging Markets, Productivity, Efficiency.
    JEL: C23 C52 G21
    Date: 2008–08
  14. By: Don Bredin (University College Dubmlin); John Elder (North Dakota State University); Stilianos Fountas (Department of Economics, University of Macedonia)
    Abstract: We use a very general bivariate GARCH-M model and quarterly data for five Asian countries to test for the impact of real and nominal macroeconomic uncertainty on in°ation and output growth. We conclude the following. First, in the majority of countries uncertainty regarding the output growth rate is related negatively to the average growth rate. Second, contrary to expectations, infation uncertainty in most cases does not harm the output growth perfor- mance of an economy. Third, in°ation and output uncertainty have a mixed effect on inflation. Consistent results are found using the VAR-GARCH-M approach to investigate the dynamic relationship between in°ation and output growth using impulse response functions. This evidence implies that macroeconomic uncertainty may even improve macroeconomic performance, i.e., raise output growth and reduce inflation. Our empirical results highlight important differences with those for industrialized countries.
    Keywords: Inflation, Output growth, Uncertainty, GARCH models
    JEL: C22 C51 C52 E0
    Date: 2008–09
  15. By: Anne Neumann
    Abstract: The increase in liquefied natural gas trade has accelerated the integration of previously segmented markets in North America, Europe, and Asia. This paper provides evidence on the integration of the transatlantic natural gas market. We test the theoretical proposition that in integrating markets commodity prices should move closer than before. Using 2,059 pairs of daily spot prices for natural gas in North America and Europe we investigate price dynamics covering the period from 1999 until 2008. We apply the Kalman Filter technique to gain detailed information on trends inherent over time. Results suggest an increasing convergence of spot prices on either side of the Atlantic Basin.
    Keywords: Market integration, spot markets, LNG, natural gas
    JEL: L95 Q49 F15
    Date: 2008
  16. By: Kin-Yip Ho (Department of Economics, Cornell University, Ithaca, USA); Albert K Tsui (Department of Economics, National University of Singapore)
    Abstract: Singapore dollar are analyzed in this paper. Our approach can simultaneously capture the empirical regularities of persistent and asymmetric effects in volatility and timevarying correlations of financial time series. Consistent with the results of Tse and Tsui (1997), there is only some weak support for asymmetric volatility in the case of the Malaysian ringgit when the two currencies are measured against the US dollar. However, there is strong evidence that depreciation shocks have a greater impact on future volatility levels compared with appreciation shocks of the same magnitude when both currencies measured against the yen. Moreover, evidence of time-varying correlation is highly significant when both currencies are measured against the yen. Regardless of the choice of the numeraire currency and the volatility models, shocks to exchange rate volatility are found to be significantly persistent.
    Keywords: Constant correlations; Exchange rate volatility; Fractional integration; Long memory; Bivariate asymmetric GARCH; Varying correlations
    JEL: C12 G15
    Date: 2008–08–22
  17. By: Leong, Choi-Meng; Puah, Chin-Hong; Abu Mansor, Shazali; Evan, Lau
    Abstract: The capability of monetary aggregates to generate stable link with fundamental economic indicators verifies the effectiveness of monetary targeting. However, traditional monetary aggregates have become flawed when financial reforms take place. As official monetary aggregates fail to maintain stable link with crucial economic indicators in Malaysia, monetary targeting has been substituted by interest rate targeting. Therefore, Divisia monetary aggregates, which are considered more superior than the simple sum counterparts are used in the investigation for the case of Malaysia. The findings imply that Divisia M2 money demand is stable and is capable to generate appropriate coefficients with correct signs for the variables included. Thus, Divisia money has shed new light on the usefulness of monetary targeting in formulating monetary policy in Malaysia.
    Keywords: Divisia money; Money demand; Error-correction model
    JEL: C43 C22 E41
    Date: 2008–06
  18. By: Aekapol Chongvilaivan (Singapore Centre for Applied and Policy Economics, Department of Economics, National University of Singapore)
    Abstract: A number of fundamental factors enhance the growth of industries’ productivity. Among others, the export-led and high-tech capital deepening strategies are widely adopted by developing economies. This paper attempts to empirically investigate the extent to which both industrial development policies affect the total factor productivity growth (TFPG) in Singapore manufacturing industries from 1974 to 2006. Using the panel data estimations, I find that both development strategies bring about TFPG via non-neutral technological growth, and the former more largely explains TFPG than does the latter. The present study captures the measure of learning by exporting by the lagged export intensity and therefore contributes to the literature, in which only whether or not firms are active in export markets is conventionally employed. Methodologically, my main contributions are a more detailed treatment of (non-neutral) technological changes, and an improved measure of export intensity.
    Keywords: Learning by exporting; High-tech Capital Deepening; Total Factor Productivity Growth; Neutral and Factor-biased Technological Progress
    JEL: F13 F14 L6
    Date: 2008–05–06
  19. By: Chowdhury, Anis
    Abstract: Most small island economies or ?microstates? have distinctly different characteristics from larger developing economies. They are more open and vulnerable to external and environmental shocks, resulting in high output volatility. Most of them also suffer from locational disadvantages. Although a few small island economies have succeeded in generating sustained rapid growth and reducing poverty, most have dismal growth performance, resulting in high unemployment and poverty. Although macroeconomic policies play an important role in growth and poverty reduction, there has been very little work on the issue for small island economies or microstates. Most work follows the conventional framework and finds no or very little effectiveness of macroeconomic policies in stabilization. They also concentrate on short-run macroeconomic management with a focus almost entirely on either price stability or external balance. The presumption is that price stability and external balance are prerequisite for sustained rapid growth. This paper aims to provide a critical survey of the extant literature on macroeconomic policies for small island economies in light of the available evidence on their growth performance. Given the high output volatility and its impact on poverty, this paper will argue for a balance between price and output stabilization goals of macroeconomic policy mix. Drawing on the highly successful experience of Singapore, it will also outline a framework for growth promoting, pro-poor macroeconomic policies for small island economies/microstates.
    Keywords: Caribbean, Pacific Islands, fiscal policy, small open economies
    Date: 2008
  20. By: Jerry Marmen Simanjuntak (College of Business and Economics The Australian National University, Australia & ABFI Institute PERBANAS, Jakarta, Indonesia)
    Abstract: The ‘excess sensitivity’ as the method of estimating the underground economy by using currency modeling is found to be unreliable. In general, there are two major weaknesses in the method. First, the key assumption, in assuming the equality of velocity of money between the official economy and the underground economy, is very unrealistic. Second, the method is found to be non robust due to the unit measurement and scale change. More specifically, the application of the excess sensitivity method using the single-step error correction model (ECM) in Bajada’s paper is very weak because there is no cointegration analysis as the prerequisite of ECM modeling. In conclusion, the possibility of using a currency demand approach in estimating the size of the underground economy is still unclear like ‘black box’, and in particular, the excess sensitivity method should be thoroughly revised.
    Keywords: underground economy, currency demand, econometric models
    JEL: C51 E26 E41
    Date: 2008–09
  21. By: Chia Ngee Choon (Department of Economics, National University of Singapore); Shawna Lim Shi en (Department of Economics, National University of Singapore); Angelique Chan (Department of Sociology, National University of Singapore)
    Abstract: Feminization of ageing leads to issues relating to long term healthcare financing since females are more susceptible to chronic illnesses. This paper assesses the current provision of long-term care (LTC) in Singapore by first examining the health status of elderly female; and then estimates the present value of LTC expenses. We calibrate the LTC costs for institutional nursing homes, community homes and informal home-based care with domestic helper. We next evaluate the comprehensiveness of a private disability insurance scheme in Singapore (Eldershield) in capturing the expected share of LTC expenditures. We compare the policy comprehensiveness of Eldershield payouts for different utilizations of LTC at different levels of means-tested government subsidies. With subsidies, the LTC cost can be adequately covered by Eldershield; without any subsidies, Eldershield is able to capture 25% to 40% of the LTC costs. We also evaluate the LTC financing implications after an osteoporotic hip fracture surgery.
    Keywords: health financing, long-term care, ageing, disability insurance, policy comprehensiveness
    JEL: H51 I11 J14
    Date: 2008–09–08

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