WHAT WILL HAPPEN IF YOUR COUNTRY ADOPTS ZERO (OR EVEN NEGATIVE) INTEREST RATE?

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There's a high correlation between inflation and interest rate. Let me explain you, the more people spend their money, the higher inflation goes. Increasing interest rate will be done to control inflation. All in all, people's spending power will lead to a scarcity when producers can't fulfil the demand. That's why inflation rises and so does interest rate.

We all know that investing in financial asset has a better return (and better risk of course) when the rate is high. The question is, what will happen if your country adopt zero or even negative interest rate? 

First, deflation! 

Deflation is considered as a reduction of the supply of money in an economy, and therefore a reduction of economic activity, which is often part of an intentional government plan to reduce prices (Cambridge). Deflation is bad as hell to me.

Deflation indicates a lack of economic growth. Economic growth shows us that consumer prices fall. The condition can be worse, guys. You can imagine, as a consumer, I might delay my purchase, expecting the prices fall further. I'm afraid that cheap price affects the labour market. As I said earlier, deflation means low economic growth. Low economic growth causes low production and finally affect the labour market.

Cutting interest rate?

Well, I can't say, by reducing interest rate is the best way to solve the problem. Lowering interest rate means reducing the opportunity to add my bank balance. In a country with zero or negative interest rate, I would just withdraw all my money if I were you.

In investor's point of view, clearly, low rate means low return. Investor absolutely won't buy any financial asset for low return. They tend to hold their money. As a result, government will spend more money to trigger the market's pruchasing power. It is known as quantitative easing. Quantitative easing is usually comitted to trigger productivity. With increasing productivity, there will be a hope for a country's economic to grow well.