Here, the government and the private sector have a joint responsibility. Loss of seignorage Joining the CMA has also involved costs such as the loss of seignorage. The issue could be viewed from two perspectives. In a growing economy, there is a need for individuals and businesses that participate in economic activities to increase their holdings of financial balances for economic transactions.
A part of these balances will be in the form of currencies issued by the Central Bank, for which the Central Bank pays no interest. Secondly, the government may “tax” existing real balances by creating additional money and causing inflation. Inflation tax - as it is often called - is a kind of forced savings, which enables the government to acquire goods and services.