Canada's Balance of International Payments

Status:
Active
Frequency:
Quarterly
Record number:
1534

This statistical program covers all economic transactions between Canadian residents and non-residents in two accounts, the current account and the capital and financial account.

Detailed information for first quarter 2014

Data release - May 29, 2014

Description

This statistical program records transactions between Canadian residents and non-residents, allocated between the current account and the capital and financial account. The transactions recorded in the balance of payments statement represent the exchanges and transfers of economic values between Canadian residents and non-residents viewed from a Canadian perspective. The economic values exchanged or transferred can be goods, services, investment income or financial claims. The transactions are presented using a double entry accounting system in which two entries should be recorded simultaneously for each transaction. The two entries are used to recognize the giving and receiving sides of every transaction. A minus sign "-" is used for an import, or for a capital outflow arising from an increase in Canadian assets abroad or a decrease in Canadian liabilities to non-residents. A plus sign "+" is used for an export, or for a capital inflow arising from a decrease in Canadian assets abroad or an increase in Canadian liabilities to non-residents.

Government relies on these statistics to help shape its financial and trade policies. Balance of payments statistics are also used extensively by businesses, the academic community, the media and the public at large for both informational and analytical purposes. Finally, they are needed to meet Canada's statistical obligations to supranational organizations, such as the International Monetary Fund (IMF) and the Organization for Economic Co-operation and Development (OECD).

The Balance of Payments statistical program integrates data from other programs within the larger Non-resident Sector Program of the Canadian System of National Accounts. For a more extensive description of the program, please refer to the document entitled "Description and definitions of Canada's balance of payments accounts" accessible in the "Documentation" section located at the end of the detailed information for this statistical program.

Statistical activity

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

To produce financial statistics, the CSNA measures the economic dimensions of the public sector of Canada, including the financial inter-relationships among the thousands of entities that make up the three levels of government in Canada (federal, provincial and territorial, and local). In order to carry out this program, the CSNA maintains a universe of all public sector entities including their complex inter-relationships.

The Non-resident Sector Program is a component of the Canadian System of National Accounts (CSNA). The linkage is possible because the standards and conventions used to establish the Canadian residency of the transactors and to compile the transactions of Canadian residents with non-residents are identical to those used in the CSNA.

Subjects

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

Data sources and methodology

Target population

The universe for balance of payments purposes embraces all transactors that reside in Canada that engage in international transactions. The transactors can be businesses, governments, non-profit institutions, or households.

Most of the data used to derive the balance of payments originates 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 transactions. This frame is constantly updated through a number of sources.

Instrument design

There are several questionnaires that collect data that are used directly for compiling Canada's Balance of International Payments. These are:

BP11 - Gold and silver transactions, assets and liabilities (monthly)
BP21 - Transactions between Canada and other countries (annual) (discontinued)
BP-QT - Quarterly investment between Canada and other countries (quarterly).(Formerly BP-21A)
BP21SQ - International transactions in commercial services (quarterly)
BP22 - Investment in Canada by non-Canadian corporations (annual)
BP22A - Investment in Canada by non-Canadian corporations (quarterly)
BP27 - Transactions between Canadian incorporated insurance companies
and their foreign affiliates, agencies and bank accounts and other companies
or persons outside Canada (annual)
BP28 - Transactions between Canadian branches and foreign insurance companies
in Canada and head or other offices, companies or persons outside Canada
(annual)
BP29 - Report by trust and mortgage loan companies in Canada on transactions with non-residents (annual)
BP31 - Futures trading with non-residents (quarterly)

There are also many other questionnaires that collect data that are used to compile other statistical outputs that ultimately feed into the balance of payments. For information about questionnaires used in other statistical programs that ultimately feed into the Balance of Payments, please follow the links listed in the Data sources section below.

The questionnaires used for the Balance of Payments were designed at various times from the 1950's to the 1990's.

Sampling

This is a sample survey with a cross-sectional design.

The quarterly questionnaires providing direct input to the Balance of Payments are sent to Canadian enterprises known to have or believed to have significant international activity. Roughly 6000 firms receive the annual questionnaires. Collection of this data on a quarterly basis is limited to approximately 900 firms with very high levels of international transactions, while there are slightly over 100 firms that are surveyed on a monthly basis.

The annual surveys are believed to cover close to 100% of the target population. Some quarterly data are modelled based on previous annual data.

A sample rotation system is used for the BP21S (International transactions in commercial services), based on the level of trade in services. For those companies that are part of the three year cycle for sample rotation, the most recent reported values are carried forward during the two years a company is out of sample.

The BP21SQ is a probability sample where each unit surveyed has a weight associated with it. Values for surveyed units are multiplied by their respective weights to estimate totals for 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.

As shown in the Data Source Diagram (accessible through the "Additional documentation" link below), data are collected from a variety of sources and integrated together following a precise conceptual framework.

Questionnaires - Data are collected, in part, via monthly, quarterly, and annual questionnaires; response is mandatory for the surveyed entities. Quarterly questionnaires are sent out on the last business day of the quarter. Respondents are instructed to send their completed questionnaires to the Balance of Payments Division within four weeks after the end of the quarter. A further follow-up is done over the next two weeks followed by phone calls from subject-matter personnel after that.

Administrative data sources --
- Citizenship & Immigration Canada (revenues for issuing migrant permits to non-residents)
- National Defence (revenues from other countries for the use of Canadian military equipments)
- Bank of Canada (geographical distribution of assets and liabilities of Canadian banks; official international reserves and demand notes of the Government of Canada)
- Canada International Development Agency (loans to foreign governments; transfer payments and contracts with Canadian service providers)
- Canada Revenue Agency (i.e. withholding tax revenues)
- U.S. Internal Revenue Service (withholding tax paid to US from Canada)
- Department of Foreign Affairs and International Trade (expenses from Canadian embassies abroad)
- International Development Research Center (research expenses)
- Bank of 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 Statistics Canada surveys -- see the Data Source Diagram (accessible through the "Additional documentation" link below).

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 quarters. 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

The data from the various sources are integrated to produce estimates of the value of the international transactions, then results of the double entry accounting system are confronted leading to estimate adjustments; finally the "statistical discrepancy" is the net unobserved inflow or outflow needed to balance the accounts.

Aggregate level estimates from the balance of payments are compared with the CSNA financial flows and income and expenditure accounts. When data at the macro level appear suspicious, micro components of the suspicious macro results are examined for possible entry errors or erroneous imputation. Respondents are contacted if necessary.

Quality evaluation

In addition to the confrontation of the results of the double entry accounting system described under 'Estimation' above, the quality of the estimates produced is ascertained using time series consistency analysis, as well as analysis of the coherence of the estimates with well publicized economic events and with related data from other programs.

Canada and the United States, largely because of their extensive commercial ties, have been comparing the bilateral Current Account of their balance of payments since 1970. In a significant number of cases, the reconciliation has resulted in revisions of values and exchange of data.

The estimates of trade in goods and services are benchmarked annually to the Input-Output Tables of the Canadian System of National Accounts. More detailed information on the CSNA and the non-resident sector is available in the additional documentation for the "Statistical activity" section above.

Disclosure control

Statistics Canada is prohibited by law from releasing any information it collects which 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.

Revisions and seasonal adjustment

Previous quarters of the current year are revised at the time the latest quarter is published. Each year, revisions extending back three years are made with the publication of first quarter data. With the Canadian System of National Accounts 2012 Historical Revision, scheduled for release beginning in October 2012, the publication of the first quarter 2012 data includes revisions extending back only one year.

This is in line with the revision policy of the Canadian Systems of National Accounts (CSNA). Each year, only the most current four years of CSNA data are subject to revision. Revision of data five or more years ago does not occur until the next historical revision as dictated by the CSNA. As a result, breaks in series are sometimes inevitable and footnotes are provided to warn the data user of any problems.

The 'fourth' preceding year corresponds to the benchmarking and revision cycle of the CSNA where all data from the CSNA are benchmarked to the Input/Output tables. Imports and exports in the current account are benchmarked to the Input Output tables.

Components of the current account for which seasonal variation is present are seasonally adjusted using X-11 ARIMA program. Most of the goods, services and current transfers are seasonally adjusted while less than half of the investment income is adjusted for seasonality.

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 transactions.

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.

The main consistency checks are quarter to quarter, where closing positions need to match with opening ones. The data from the four quarterly responses should match with the annual data.

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 the monthly questionnaires is excellent, being consistently between 95% and 100%. The response rate for the quarterly questionnaires is approximately 60%, and slightly above 50% for the annual questionnaires. When the annual respondents are weighted based on key financial variables, the response rate is around 60%. 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.

Statistical discrepancy - Equality between the debit part and the credit part of the accounts is never fully achieved due to the variety of sources used and the myriad of transactions. A current account surplus or deficit should correspond to an equivalent outflow or inflow in the capital and financial account. In other words, the two accounts should add to zero. In fact, as data are compiled from multiple sources, the two balance of payments accounts rarely equate. As a result, the statistical discrepancy is the net unobserved inflow or outflow needed to balance the accounts.

For the seven years 1996 through 2002, the ratio of the statistical discrepancy to gross current account receipts plus payments for Canada, at 0.9%, compares well against the results for other countries such as the United States (2.2%) but is above the global average of 0.4%.

For a more detailed discussion of the data accuracy, component by component, see the 'Data Quality' document available in the "Documentation" section below.

Documentation