What does downward nominal-wage rigidity imply for monetary policy?

A recent paper has suggested a reason why there might be a lasting trade-of f between inflation and unemployment at low inflation rates. This has led s ome economists to recommend that Canada increase its inflation rate. The id ea underlying this view is that, because firms are reluctant to cut workers ' nominal wages, a moderate amount of inflation can be used to facilitate n eeded reductions in real wages. This paper discusses the link from downward nominal-wage rigidity to unemployment, and considers some of the issues th at need to be addressed in order to determine whether a change in Canada's monetary policy is warranted.