Negative rates are the ultimate absurdity and indicate a lot about the current state of affairs. A rational market participant would never be held to ransom from imposed nominal negative rates (to the extend that this is possible). They would rather switch to physical cash if better investment opportunities elsewhere are lacking. If the alternative of switching to physical cash is removed, than this has very serious implications about one's choice over own wealth.

There is a difference between SHORT-rates and actual (bond) yields. The former are not tradable, so while the latter cannot be negative, the former can be negative and in fact are negative in current markets, and one of the points of the papers is that financially and mathematically there's nothing wrong with that and it gives a way to deal with that mathematically. BTW, the fact that negative short-rates are not disallowed is not a new idea, see the so-called Black-Rogers model: Black, F. (1995) Interest Rates as Options. J. Finance 50(5): 1371-1376; Rogers, L.C.G. (1995) Which Model for Term-Structure of Interest Rates Should One Use? In: Davis, M.H.A., Du e, D. and Karatzas, I. (eds.) Proceedings of IMA Workshop on Mathematical Finance, IMA Vol. 65. New York, NY: Springer-Verlag, pp. 93-116. What's new in my paper is the way of dealing with negative short-rates in a new way, which is different from the Black-Rogers model.

Of course negative rates are bad. What could possibly go wrong when constructing a policy designed to coerce risk elevation without commensurate payment for the exposure. Negative rates are part of a scheme to suppress rates and reduce them along all points of the curve and all credit quality segments. As long as conditions remain fully stable there is the illusion of functionality. Then something goes amiss. Look around the oil and gas production business. Cheap money, attractive prices leads to high production. Prices recede, debt unsupportable produces industry recession and bankruptcies. People continue to confuse the nominal cost of money with calculating the true debt service obligation. Believe it or not, principal must be repaid somewhere along the timeline in some way.

@Larry Please see my comment right before yours. Interest rate is NOT the same as short-rate. The title of my update is "Are negative short rates bad?" Short-rates can be and are in fact negative in the current environment. Nothing wrong with negative short rates. Not if you read my paper, or Black's or Rogers's, etc.

Is "short rate" a reference to demand money such as a call rate or a very brief maturity? Any "rate" assigned as the price of money regardless of time duration is an interest rate. Adjusting for inflation or applying other such adjustments may yield a negative rate reading but that is an effective yield factor specific to the situation cited of which the interest rate is a component. Policies designed to create prospective negative yield or cost situations are as harmful and absurd as a negative nominal yield. Negative rates produce capital misallocations. /Undercharging for money relative to economic risk produces the same result. Always has and always will regardless of the academic arguments holding otherwise.

Short rate is the instantaneous rate of borrowing. It's not tradable, so it being nonnegative isn't a problem so long as all tradable bond yields are well-behaved. Pls see my paper and other references mentioned above.