What is a peso problem? In the case of fixed exchange rates, explain how peso problems can

Question:

What is a peso problem? In the case of fixed exchange rates, explain how peso problems can account for persistent interest rate differentials. Study the U.S.–Britain short-term (end-of-month) nominal interest rate differentials shown below for the year 1896 (NBER series 13034). Both countries were on the gold standard at a fixed of $4.86 throughout this year. Did the United States have a peso problem? When did it get really big? When did it go away? (Extra Credit: Do some research on the Web and discover the political reasons for the timing of this peso problem.)
Jan 1896…………………………………3.84%
Feb 1896………………………………..2.94%
Mar 1896………………………………..2.76%
Apr 1896………………………………...2.40%
May 1896……………………………….1.63%
Jun 1896………………………………...1.20%
Jul 1896…………………………………1.43%
Aug 1896……………………………….3.77%
Sep 1896………………………………..3.70%
Oct 1896………………………………..8.51%
Nov 1896……………………………….2.60%
Dec 1896……………………………..– 1.39%
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...