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The counterfactual estimation technique of Pesaran and Smith () is employed to provide an assessment of the impact stemming from the implementation of negative interest rates in three European economies (Denmark, Sweden and Switzerland). The analysis indicates that negative interest rates did not have a significant effect on bank lending growth or inflation in any country. This failure to reject the policy ineffectiveness hypothesis most likely lies in the fact that negative interest rates did not ease the situation for the factors restricting the supply of bank lending, namely bank funding costs and Return‐on‐Equity. [ABSTRACT FROM AUTHOR]

Estimates a loanable funds model over the period 1959-1990 for the determination of after-tax expected real interest rates in Europe. Degree of national capital mobility; Estimation of expected inflation rates; Role of crude oil prices in the determination of real interest rates; Changes in capital stock returns.