What have we seen in countries where the central bank’s interest rate has become very negative?

It is possible that the ECB will cut its key interest rates, which would lead to very negative key interest rates (at least for the banks’ deposit rate at the central bank). In this Flash we seek to identify the consequences of this policy by looking at two countries where the central bank’s key interest rate has become very negative: Sweden and Switzerland. We examine, in these countries: Long-term interest rates and fiscal policy; The situation of banks and credit; Possible bubbles; Capital flows and exchange rates; Labour productivity. We see that very negative central bank interest rates seem to lead to some negative effects, quite randomly and not systematically: Weakening of banks in Switzerland; Real estate bubble in Sweden; Exchange-rate depreciation in Sweden; Low productivity gains in both countries, but no fiscal deficit or significant slowdown in credit.