Analyze how valuation changes affected the NIIP of Canada between 2000 and 2021.

Step 1: Obtain Canada's net international investment position from Statistics Canada (Table 36-10-0485-01) at quarterly frequency from Q3, 2000 to Q3, 2022. Link: https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3610048501

Step 2: Obtain Canada's quarterly current account over the same time period. Construct a 'proxy' NIIP by taking the initial NIIP for Q3, 2000 and successively adding the quarterly current account balance to it.

Step 3: In a time series graph, compare the proxy NIIP with the actual NIIP as reported by Statistics Canada. From this graph, say how valuation effects have either added or subtracted from Canada's NIIP over this period.

Step 4: Get an estimate of the Canadian Real Effective Exchange Rate (REER) at quarterly frequency over the same period (e.g. from Fred data). Note that the REER as measured is usually the opposite of our convention (an increase is an appreciation), so take the reciprocal of this series to make things consistent with the convention. Then, having done this, add the adjusted REER to your graph, (using a secondary axis since the REER is in a different unit that NIIP).

Is the REER positively or negatively correlated with the actual NIIP? How about the correlation with the proxy NIIP? Can you explain these results?