<p>Negative Interest Rate Policy (NIRP) is a macroeconomic tool used by central banks to stimulate economic growth. It involves setting interest rates below zero, aiming to encourage spending and investment.</p>

<h2>How It Works</h2>
<p>In a NIRP, banks are charged for holding excess reserves with the central bank. This is done to incentivize them to lend more to businesses and consumers, rather than leaving money idle. Here's a simple breakdown:</p>
<ul>
  <li>Central bank sets interest rate below zero.</li>
  <li>Banks have to pay to keep money at the central bank.</li>
  <li>Banks pass on these costs to borrowers, making loans cheaper.</li>
  <li>Cheaper loans encourage businesses to invest and consumers to spend.</li>
</ul>

<h2>Why It Matters</h2>
<p>NIRP matters because it's a tool to combat economic stagnation and deflation. For instance, in 2016, the European Central Bank (ECB) implemented a NIRP to boost inflation and stimulate growth. By lowering borrowing costs, NIRP can help businesses expand, hire more workers, and increase consumer spending. However, it also comes with risks, such as potential bank runs and reduced profitability for banks.</p>