Experiences of applying negative interest rate policy so far

Abstract

Traditional economic theories generally rejected the possibility of implying negative nominal interest rates in practice. However, in the recent years it has become evident that the zero lower bound is not a binding constraint. The dangers, which are formulated at the theoretical level have in reality only moderate effects. The example of the euro area, Denmark, Switzerland, Sweden and Japan demonstrates that negative interest rates do not result in endless money demand. The monetary policy transmission mechanism does not
differ significantly from that under the normal circumstances. However, possible negative effects at the bank sector level and the threat of financial instability can not be ignored. The purpose of the paper is to summarize the problem in a complex framework, taking into account theoretical and practical examples.