Canada's International Investment Position (IIP)

Canada's International Investment Position (IIP)
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Detailed information for second quarter 2016

Status:

Active

Frequency:

Quarterly

Record number:

1537

This statistical program measures at a point in time the value and composition of Canada's financial assets and liabilities with non-residents.

Data release - August 30, 2016

Description

Canada's international investment position is the statistical statement that presents at a point in time the value and composition of Canadian financial assets with non-residents and Canadian financial liabilities to non-residents.

Canadian international financial assets are owned by Canadian residents whereas Canadian international financial liabilities are owned by non-residents. They both result from past transactions in financial instruments between Canadian residents and non-residents and other revaluations in these financial instruments. International financial assets are claims of Canadians on non-residents whereas international financial liabilities represent debt of Canadians vis-à-vis non-residents.

The difference between total international financial assets and total international financial liabilities is referred to as the net international investment position. Put another way, Canada's net investment position is the difference between what Canada owns (its external assets) and what Canada owes (its external liabilities) to non-residents.

There are four functional categories of financial assets and liabilities in the international investment position: direct investment, portfolio investment, reserves assets and other investment. These four functional categories largely reflect the nature of the investment in another country.

Direct investment is a functional category where the investor residing in one country has a significant influence on the management of an enterprise residing in another country; this means the direct investment also encompasses investment where there is a substantial influence to the point of having a controlling interest.

In the portfolio investment functional category, the investor in financial instruments does not have a significant influence on the non-resident issuer of the instruments. The reserve assets category includes external assets that are readily available to and controlled by the monetary authority for various purposes, including for intervention in exchange rate markets. In the functional category called other investment, there is also no influence from the investor's viewpoint, but unlike portfolio investment, there is generally no market to trade the instruments used to carry out the investment.

Government relies on these statistics to help assess Canada's financial condition, and to help assess economic integration between Canada and other nations. Other users of these statistics include the academic community and the credit rating agencies. Finally, they are needed to meet Canada's statistical obligations to supranational organizations, such as the International Monetary Fund and the Organization for Economic Co-operation and Development.

Statistical activity

The Canadian System of Macroeconomic Accounts provides a conceptually integrated statistical framework for studying the state and behaviour of the Canadian economy. The accounts are centered on the measurement of activities associated with the production of goods and services, the sales of goods and services in final markets, the supporting financial transactions and the resulting wealth positions.

Reference period: Calendar year

Subjects

  • Balance of international payments
  • Economic accounts
  • Government financial statistics

Data sources and methodology

Target population

The universe for the international investment position includes all investors that reside in Canada and hold assets with non-residents, as well as all investors that reside in Canada and have liabilities to non-residents. The investors can be businesses, governments, non-profit institutions, or households.

Most of the data used to derive the international investment position originate from surveys of Canadian companies that are asked to consolidate all of their Canadian operations and accordingly are referred to as Canadian enterprises. The survey frame is believed to contain up-to-date coverage of all Canadian enterprises having a significant amount of international assets or liabilities. This frame is constantly updated through a number of sources.

For the direct investment functional category, data are collected from companies engaged in a direct investment relationship. Survey data is supplemented with administrative data to ensure full coverage.

For the portfolio investment functional category, data are collected from institutional investors and financial intermediaries.

For the other investment functional category, the data are gathered mostly from Canadian banks.

Instrument design

There are several questionnaires that collect data that are used directly for compiling Canada's international investment position. These are:

BP-CIA- Canadian Investment Abroad (annual)
BP-FIC- Foreign Investment in Canada(annual)
BP-STRUC- Structure of Canadian Companies in the Reporting Enterprise
BP54 -- Canadian portfolio investment (annual)
BP55 - Particulars of issues of funded debt and foreign bank borrowings (annual)
BP56 - Geographic distribution of selected long-term debt booked in Canada at Canadian banks and consolidated Canadian subsidiaries (annual)

The questionnaires used for the International Investment Position were originally designed at various times from the 1950's. They have been periodically redesigned up to recently in the case of the major investment surveys.

Sampling

Questionnaires dealing with direct investment or other investment are sent to Canadian enterprises known to have or believed to have significant international assets or liabilities, whereas the questionnaire dealing with portfolio investment is sent to institutional investors and financial intermediaries.

There are roughly 3000 firms that meet the sampling criteria for questionnaires dealing with direct investment or other investment, while there are approximately 600 firms that receive the portfolio investment questionnaire. These surveys are believed to cover close to 100% of the target population.

Data sources

Responding to this survey is mandatory.

Data are collected directly from survey respondents, extracted from administrative files and derived from other Statistics Canada surveys and/or other sources.

Questionnaires - Data are collected, in part, via annual questionnaires; response is mandatory for the surveyed entities. Respondents are instructed to send their completed questionnaires to the International Accounts and Trade Division within four weeks of receiving the questionnaire. A follow-up is done after an additional two weeks if no response is received, followed by phone calls.

A number of administrative data sources are also used such as --
- Innovation, Science and Economic Development Canada (monthly list of Canadian companies with non-resident investments)
- Bank of Canada (geographical distribution of assets and liabilities of Canadian banks; official international reserves) and the Office of the Superintendent of Financial Institutions (supplementary administrative sources provided by financial institutions)
- Department of Finance Canada and Export Development Canada (loans to foreign governments and corporations)
- Citizenship and Immigration Canada (number of landed immigrants)
- Treasury Board (allowances)
- Bank for International Settlements (non-bank deposits abroad; individually supplied by the US Treasury and Bank of England since the BIS is usually one quarter late in arriving)


Other Balance of payments surveys are used to compile the International Investment Position such as --
- Canada's Balance of International Payments Quarterly Data (record no. 1534) provides data regarding recent direct investment and other investment transactions affecting both the asset and liability side of the international investment position.
- Canada's International Transactions in Securities Monthly Survey (record no. 1535) provides data regarding recent portfolio investment transactions affecting both the asset and liability side of the international investment position.

Other sources - A variety of other sources are used such as financial press, business publications, company reports, etc.

View the Questionnaire(s) and reporting guide(s).

Error detection

The raw data received from questionnaire respondents are submitted to edits to ensure consistency and coherence. Historical edits compare data from the latest period to data from earlier reference periods. When necessary, there is follow up with the respondent to verify or correct the data.

There is a manual comparison at an aggregate level with values from previous periods. When necessary, the manual comparison is made at a micro level.

The data received are also verified against publicly available sources such as securities filings and the financial press.

Imputation

Questionnaires - Historical imputation is used for non-response. Results for the most recent reference period available are used. The annual values are weighted quarterly based on historical quarterly patterns. Data from companies' annual reports are sometimes used to help impute for non-response.

Other sources - Identity equations are used to estimate values not yet available at estimate production time.

Estimation

Benchmark data on international investment positions are mostly collected on an annual basis. To estimate quarterly changes in the international investment positions that have occurred subsequent to the most recent annual data collection, quarterly data about transactions are taken from Canada's Balance of International Payments Quarterly Data (record no. 1534). Adjustments are then made to account for currency exchange rate fluctuations and other valuation changes.

Quality evaluation

Before the international investment position data are published, several steps are taken to ensure the quality of the estimates.

The change in position from the previous period is compared to the data on investment transactions during the period as shown in Canada's Balance of International Payments Quarterly Data (record no. 1534).

The evolution of the net international investment position (assets less liabilities) is compared with the current account surplus or deficit as shown in Canada's Balance of International Payments Quarterly Data (record no. 1534).

The asset and liability data from the National Balance Sheet Accounts (record no. 1806) are also reviewed as a cross check for the international investment position data.

Disclosure control

Statistics Canada is prohibited by law from releasing any information it collects that could identify any person, business, or organization, unless consent has been given by the respondent or as permitted by the Statistics Act. Various confidentiality rules are applied to all data that are released or published to prevent the publication or disclosure of any information deemed confidential. If necessary, data are suppressed to prevent direct or residual disclosure of identifiable data.

In order to prevent any data disclosure, confidentiality analysis is done using the Statistics Canada Generalized Disclosure Control System (G-Confid). G-Confid is used for primary suppression (direct disclosure) as well as for secondary suppression (residual disclosure). Direct disclosure occurs when the value in a tabulation cell is composed of or dominated by few enterprises while residual disclosure occurs when confidential information can be derived indirectly by piecing together information from different sources or data series.

Revisions and seasonal adjustment

Revisions - Statistical revisions are carried out in order to incorporate the most recent information from quarterly and annual surveys.
Data are released approximately 70 days after the reference period. Estimates for each quarter are revised when those for subsequent quarters of the same year are published. At the time of the third quarter of each year, revisions are generally made back three years. Canada's International Investment Position is not normally revised again except when comprehensive revisions are carried out.

There is no seasonal adjustment of the international investment position.

Data accuracy

Non-sampling errors - While considerable effort is made to ensure high standards throughout all stages of collection and processing, the resulting estimates are inevitably subject to a certain degree of non-sampling error. Examples of non-sampling error are coverage error, data response error, non-response error and processing error.

Coverage error can result from incomplete listing and inadequate coverage of the population of Canadian transactors that engage in international investment.

Data response error may be due to questionnaire design, the characteristics of a question, inability or unwillingness of the respondent to provide correct information, misinterpretation of the questions or definitional problems.

Non-response error is related to respondents that may refuse to answer, are unable to respond or are too late in reporting. In these cases, data are imputed. The extent of any imputation error decreases with increases in the response rate and attempts are therefore made to obtain as high a response rate as possible. Final response rates vary considerably between the various questionnaire types. The response rate for most of the international investment position questionnaires is slightly above 50%, except for the portfolio investment questionnaire, where the response rate is approximately 75%. Analysts keep in contact with the respondents to try to maximize the response rate. Slow reporting is often an issue.

Processing error may occur at various stages of processing such as data entry, editing and tabulation. Measures have been taken to minimize these errors. Data entry and edit are performed simultaneously due to the spreadsheet design which allows errors to be quickly seen. Historical ratios also aid in eliminating outliers created by data entry. Tabulation is automated to eliminate human error.

Documentation

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