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The author empirically assesses the effects of institutional and political factors on the need and willingness of governments to make large fiscal adjustments.

Burkart and Ellingsen's (2004) model of trade credit and bank credit rationing predicts that trade credit will be used by medium-wealth and low-wealth firms to help ease bank credit rationing.

Over the past year, both private sector financial market participants and public sector authorities have been preoccupied with the topic of liquidity as never before. Throughout the financial market turbulence, private liquidity management has become tremendously important.

The Bank of Canada (the Bank), through its Standing Liquidity Facility (SLF), provides access to liquidity to those institutions that participate directly in the Large Value Transfer System (LVTS).

The Bank of Canada (the Bank), through its Standing Liquidity Facility (SLF), provides access to liquidity to those institutions that participate directly in the Large Value Transfer System (LVTS).

The recent dislocations in credit markets have brought these issues into sharp focus. Among other things, the market turbulence has highlighted the critical role that confidence and liquidity play in financial markets.

This section of the Financial System Review examines the recent performance of the Canadian financial system and the factors, both domestic and international, that are influencing it.

The Governing Council judges that the risks to the Canadian financial system have decreased somewhat relative to the December FSR, but that the overall level of risk remains high. The key risks are similar to those highlighted in December, and emanate primarily from the external environment.

The Bank of Canada has distinct roles as a lender of last resort. This article outlines how and under what circumstances the Bank can routinely provide liquidity to facilitate payment settlement, as well as the various ways it can respond in more exceptional situations.

Innovations in basic information technologies, in payment applications, and in the availability of global markets, as well as substantial changes in financial sector policy, have fundamentally changed how the retail payments system in Canada operates. Principally, the volume and types of electronic payments have grown, and there is increased participation by diverse groups of financial and non-financial institutions as providers of retail payment services. The resulting policy problem for payment systems is how best to benefit from efficiency gains while managing payment risks. O'Connor examines the effect of the technological and legislative changes and the initiatives developed by the public and private sectors in such areas as the market arrangements for services; customer risks and costs for settling large-value retail payments; the security of payment information and the efficiency with which it is transmitted; and the effects of differing regulatory regimes on competition among providers of retail payment services.