Negative interest rates: How do they work? Case studies in Japan, Europe, Switzerland, Sweden, and Denmark

This paper will focus on the impacts of negative interest rate implementations in five areas. To this day, there have only been a handful of areas that have had their central banks lower the interbank interest rate to below zero, thus breaking through the zero‐lower bound theory in economics. The areas studied here are Japan, Switzerland, Europe, Denmark, and Sweden. All but Japan lowered the interest rates below zero on reserve funds in their respective central banks while Japan lowered the rate only for the amounts excess of reserves. The goal of this survey article is to explain why these areas decided to implement such an unorthodox policy and determine what implications these policies have on the general economy of the area and the banks within.