The difficulty or impossibility of predicting such an event creates problems in modeling the economy and financial markets by using the past.
[1] The precise origin of the term is unknown, but it is generally attributed to Milton Friedman.
Friedman reasoned that interest differential reflected concern in the market that the peso would be devalued.
This was eventually realized in 1976 when the peso, allowed to float, fell 46 percent.
[1] Since the currency value had been pegged for a long time, the differential in interest rate looked like an anomaly or flaw in financial markets – an investor could exploit the difference by simple currency conversion and make a profit from the arbitrage opportunity.