Rhys R. Mendes

Managing Director

Bio

Rhys R. Mendes was appointed Managing Director of the International Economic Analysis Department (INT), effective November 1, 2017. In this capacity, he is responsible for the management and strategic direction of the department, which includes providing rigorous and timely analysis of global economic conditions as well as advice on the conduct of monetary policy and international policy issues.

Mr. Mendes joined the Bank of Canada in 2004. Four years later, he was appointed Assistant Chief of the Canadian Economic Analysis Department (CEA) where he led the team responsible for the development of ToTEM II, an updated version of the Bank’s main macroeconomic model. In 2011, he became Director of Policy Analysis in INT, where he represented Canada at G20 meetings and other international forums. He was then appointed Deputy Chief of CEA in 2013. Prior to his current role, Mr. Mendes was Managing Director of Economic and Financial Research, working with the analytic departments to develop and execute a leading-edge research work plan to support all of the Bank’s policy functions.

Throughout his career, Mr. Mendes has contributed to the Bank’s research on the monetary policy framework and is regularly consulted by foreign central banks on framework design issues. In March 2006, Mr. Mendes was on secondment to the International Monetary Fund as an advisor to the Indonesian central bank.

Born in Richmond Hill, Ontario, Mr. Mendes holds a PhD in economics from the University of Toronto.


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Speeches

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Staff analytical notes

A Structural Interpretation of the Recent Weakness in Business Investment

Staff Analytical Note 2017-7 Russell Barnett, Rhys R. Mendes
Since 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 Traps

Staff Analytical Note 2016-16 Robert Amano, Thomas J. Carter, Rhys R. Mendes
What 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 Economics

Staff Analytical Note 2016-14 Robert Amano, Thomas J. Carter, Rhys R. Mendes
Conventional 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.

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Staff discussion papers

The Power of Helicopter Money Revisited: A New Keynesian Perspective

Staff Discussion Paper 2020-1 Thomas J. Carter, Rhys R. Mendes
We 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 Canada

Staff Discussion Paper 2018-18 Thomas J. Carter, Rhys R. Mendes, Lawrence L. Schembri
In 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 Theory

Staff Discussion Paper 2017-13 Rhys R. Mendes, Stephen Murchison, Carolyn A. Wilkins
For 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 Issues

Staff Discussion Paper 2015-8 Oleksiy Kryvtsov, Rhys R. Mendes
Bank 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 Canada

Staff Discussion Paper 2014-5 Rhys R. Mendes
A 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 Debt

Staff Discussion Paper 2013-3 Martin Brooke, Rhys R. Mendes, Alex Pienkowski, Eric Santor
The 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?

Staff Discussion Paper 2007-4 Meenakshi Basant Roi, Rhys R. Mendes
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 […]

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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.

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Technical reports

ToTEM II: An Updated Version of the Bank of Canada’s Quarterly Projection Model

This 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.
Content Type(s): Staff research, Technical reports Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): E, E1, E17, E2, E20, E3, E30, E4, E40, E5, E50, F, F4, F41

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Bank publications

Bank of Canada Review articles

November 13, 2014

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.
May 17, 2012

Inflation Targeting: The Recent International Experience

In 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 […]
August 18, 2011

Introducing Multiple Interest rates in ToTEM

This 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.
November 11, 2009

Declining Inflation Persistence in Canada: Causes and Consequences

The 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.

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Journal publications

Other

Published comments

  • “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.