Rhys R. Mendes was appointed Deputy Governor of the Bank of Canada, effective July 2023. In this role, he oversees the Bank’s economic and financial research, its analysis of international economic developments and he serves as the Bank’s G7 and G20 Deputy. As a member of the Bank’s Governing Council, he shares responsibility for decisions with respect to monetary policy and financial system stability and for setting the strategic direction of the Bank.
At the time of his appointment, Mr. Mendes was on secondment to the Department of Finance, where he was serving as Assistant Deputy Minister. Prior to his secondment in 2021, Mr. Mendes had been the Managing Director of the Bank of Canada’s International Economic Analysis Department. He was responsible for the management and strategic direction of the department, providing rigorous and timely analysis of global economic conditions as well as advice on monetary policy and international policy issues. He also led large parts of the Bank’s work to review the monetary policy framework for the 2021 renewal of the inflation-targeting agreement with the Government of Canada.
Mr. Mendes joined the Bank in 2004. He held increasingly senior positions before being appointed as Deputy Managing Director of the Canadian Economic Analysis Department in 2013, Managing Director of Economic and Financial Research in 2016, then Managing Director of International Economic Analysis in 2017. Throughout his career, Mr. Mendes has contributed to development of the Bank’s economic modelling and has been an expert in monetary policy framework design and international economic policy issues.
Born in Richmond Hill, Ontario, Mr. Mendes holds a BA in economics from York University, and an MA and PhD in economics from the University of Toronto.
Staff analytical notes
A Structural Interpretation of the Recent Weakness in Business InvestmentSince 2012, business investment growth has slowed considerably in advanced economies, averaging a little less than 2 per cent versus the 4 per cent growth rates experienced in the period leading up to crisis. Several recent studies have attributed a large part of the weakness in business investment to cyclical factors, including soft aggregate demand, and, to a lesser degree, heightened uncertainty and tighter financial conditions.
Comparing Forward Guidance and Neo-Fisherianism as Strategies for Escaping Liquidity TrapsWhat path should policy-makers select for the nominal rate when faced with a liquidity trap during which the effective lower bound binds?
A Primer on Neo-Fisherian EconomicsConventional models imply that central banks aiming to raise inflation should lower nominal rates and thus stimulate aggregate demand. However, several economists have recently challenged this conventional wisdom in favour of an alternative “neo-Fisherian’’ view under which higher nominal rates might in fact lead to higher inflation.
Staff discussion papers
The Bank of Canada’s “Horse Race” of Alternative Monetary Policy Frameworks: Some Interim Results from Model SimulationsBank of Canada staff are running a “horse race” of alternative monetary policy frameworks in the lead-up to 2021 renewal of the Bank’s monetary policy framework. This paper summarizes some interim results of model simulations from their research.
The Power of Helicopter Money Revisited: A New Keynesian PerspectiveWe analyze money financing of fiscal transfers (helicopter money) in two simple New Keynesian models: a “textbook” model in which all money is non-interest-bearing (e.g., all money is currency), and a more realistic model with interest-bearing reserves.
Credibility, Flexibility and Renewal: The Evolution of Inflation Targeting in CanadaIn 1991, Canada became the second country to adopt an inflation target as a central pillar of its monetary policy framework. The regime has proven much more successful than initially expected, both in achieving price stability and in stabilizing the real economy against a wide range of shocks.
Monetary Policy Under Uncertainty: Practice Versus TheoryFor central banks, conducting policy in an environment of uncertainty is a daily fact of life. This uncertainty can take many forms, ranging from incomplete knowledge of the correct economic model and data to future economic and geopolitical events whose precise magnitudes and effects cannot be known with certainty.
The Optimal Level of the Inflation Target: A Selective Review of the Literature and Outstanding IssuesBank of Canada research done prior to the most recent renewal of the inflation-control agreement in 2011 concluded that the benefits associated with a target below 2 per cent were insufficient to justify the increased risk of being constrained by the zero lower bound (ZLB) on nominal interest rates.
The Neutral Rate of Interest in CanadaA measure of the neutral policy interest rate can be used to gauge the stance of monetary policy. We define the neutral rate as the real policy rate consistent with output at its potential level and inflation equal to target after the effects of all cyclical shocks have dissipated.
Sovereign Default and State-Contingent DebtThe Latin American debt crises in the 1980s and the Asian crisis in the late 1990s both provided impetus for reforming the framework for restructuring sovereign debt. In the late 1980s, the Brady plan established the importance of substantive debt relief in addressing some crises.
Should Central Banks Adjust Their Target Horizons in Response to House-Price Bubbles?The authors investigate the implications of house-price bubbles for the optimal inflation-target horizon using a dynamic general-equilibrium model with credit frictions, house-price bubbles, and small open-economy features. They find that, given the distribution of shocks and inflation persistence over the past 25 years, the optimal target horizon for Canada tends to be at the lower […]
Staff working papers
Could a Higher Inflation Target Enhance Macroeconomic Stability?Recent international experience with the effective lower bound on nominal interest rates has rekindled interest in the benefits of inflation targets above 2 per cent. We evaluate whether an increase in the inflation target to 3 or 4 per cent could improve macroeconomic stability in the Canadian economy.
ToTEM II: An Updated Version of the Bank of Canada’s Quarterly Projection ModelThis report provides a detailed technical description of an updated version of the Terms-of-Trade Economic Model (ToTEM II), which replaced ToTEM (Murchison and Rennison 2006) in June 2011 as the Bank of Canada’s quarterly projection model for Canada.
Bank of Canada Review articles
Should Forward Guidance Be Backward-Looking?When constrained by the zero lower bound, some central banks have communicated a threshold that must be met before short-term interest rates would be permitted to rise. Simulation results for Canada show that forward guidance that is conditional on achieving a price-level threshold can theoretically raise demand and inflation expectations by significantly more than unemployment thresholds. This superior performance is attributable to the fact that the price-level threshold depends on past inflation outcomes. In practice, however, history-dependent thresholds such as this might be more challenging for central banks to communicate.
Inflation Targeting: The Recent International ExperienceIn the years since the 2006 renewal of Canada’s inflation-control agreement, monetary policy regimes have faced significant shocks, including the global economic and financial crisis. This article reviews the recent experience with inflation targeting, including the debate about the appropriate role of monetary policy in maintaining financial stability. In the aftermath of the crisis, both […]
Introducing Multiple Interest rates in ToTEMThis article describes changes to the structure of ToTEM—the Bank of Canada’s main model for projection and policy analysis—that allow an independent role for long-term interest rates, as well as for the risk spreads that lead to differences in the interest rates faced by households, firms and the government. These changes broaden the range of policy questions that the model can address and improve its ability to explain data. The authors use the model to simulate the effects of shocks to the risk spreads on interest rates similar to those that occurred during the recent financial crisis. They also use the model to assess the macroeconomic impact of higher requirements for bank capital and liquidity.
Conference Summary: New Frontiers in Monetary Policy DesignAlthough the current inflation-targeting regime has served Canadians well, sound public policy demands the continuous exploration of possible improvements in the monetary policy framework.
Declining Inflation Persistence in Canada: Causes and ConsequencesThe persistence of both core and total consumer price index inflation in Canada has declined significantly since the 1980s. In addition to providing up-to-date estimates of inflation persistence, this article examines possible reasons for the decline suggested in the literature. The role played by monetary policy, through its effect on price- and wage-setting behaviour, is distinguished from possible changes to the structure of the economy that are independent of monetary policy. The authors also discuss the implications for monetary policy of low structural persistence in inflation, including the choice of an inflation-targeting regime versus a price-level-targeting regime.
The Economy, Plain and Simple
- “Chair’s remarks: Understanding commodity price cycles in emerging Asia and their implications for monetary policy”
In Globalisation and inflation dynamics in Asia and the Pacific, BIS Papers No. 70, pp. 67-69, January 2013, Bank for International Settlements.