Negative real interest rate refers to a situation where the inflation rate is higher than the base interest rate. In other words, it means that the purchasing power of money is decreasing over time because the rate of inflation is eroding the returns earned on investments or savings. This situation has significant implications for borrowers, lenders, investors, and consumers.

1. Nominal Interest Rate:
- The nominal interest rate is the stated interest rate on a loan or investment. It does not take into account the effects of inflation.
- It is the rate that is typically advertised by banks and financial institutions.

2. Inflation Rate:
- Inflation is the rate at which the general level of prices for goods and services is rising, leading to a decrease in the purchasing power of money.
- It is measured by various economic indicators, such as the Consumer Price Index (CPI) or the Producer Price Index (PPI).

3. Base Interest Rate:
- The base interest rate, also known as the benchmark interest rate, is set by the central bank of a country.
- It serves as a reference rate for all other interest rates in the economy, including loans, mortgages, and savings accounts.
- Central banks use the base interest rate to control inflation and stimulate or slow down economic growth.

Explanation:
- When the inflation rate is higher than the base interest rate, it results in a negative real interest rate.
- This means that the returns on investments or savings are not keeping pace with inflation, leading to a decrease in purchasing power.
- For example, if the nominal interest rate is 2% and the inflation rate is 3%, the real interest rate would be -1%.
- In this scenario, the rate of inflation is eroding the purchasing power of money faster than it is being compensated by the interest earned.

Implications:
1. Borrowers:
- Borrowers benefit from negative real interest rates as they are effectively paying back loans with money that has decreased in value.
- Their debt burden becomes less burdensome over time.

2. Lenders:
- Lenders, such as banks or individuals who lend money, suffer from negative real interest rates as the returns on their investments are eroded by inflation.
- They receive less purchasing power in return for their loaned funds.

3. Investors:
- Investors may face challenges in generating positive real returns on their investments, especially if the inflation rate is high.
- They need to carefully consider the impact of inflation on their investment returns.

4. Consumers:
- Consumers experience a decrease in the purchasing power of their money due to negative real interest rates.
- They may find it harder to maintain their standard of living as prices rise faster than their income or savings.

Conclusion:
A negative real interest rate occurs when the inflation rate surpasses the base interest rate. It indicates a decrease in the purchasing power of money over time. Understanding the implications of negative real interest rates is crucial for borrowers, lenders, investors, and consumers in making informed financial decisions.