Survival Analysis of Bank Note Circulation: Fitness, Network Structure and Machine Learning
The main objective of this research is to understand bank note distribution patterns. We do this in a novel way—by looking at bank notes through the lens of big data analytics. We use data from the Bank of Canada's Currency Information Management Strategy (IMS) to study the notes themselves.
We perform an exploratory analysis of the networks spanned by the bank notes’ circulation across 10 regions in Canada. The analysis focuses on how long the bank notes stay in the market, i.e., their duration in circulation. We also develop an empirical framework to establish what determines a bank note’s duration in the market.
Our results show that the physical fitness of a bank note determines its duration in circulation. We also find that the denomination of the bank note is even more relevant to the time it spends in the market. This suggests that the denomination of a bank note may be related to the type of transaction, and that these transactions may correspond to the bank note’s likelihood of being deposited back to the Bank of Canada. This finding is informative because it directly speaks to the determinants of the distribution patterns and serves as a starting point for interesting questions: What denominations are relevant for particular transactions, and why do these transactions dramatically change a bank note’s duration in circulation?