Capital Flight
A rapid outflow of financial capital from a country in response to a loss of confidence in its currency, government, banking system, or general policy environment. Capital flight is the active behavioral response that drives a sudden stop -- domestic and foreign investors collectively reduce their exposure to local-currency assets, putting downward pressure on the exchange rate and upward pressure on local rates. Capital controls (limits on cross-border outflows) are the policy response of last resort when capital flight threatens system stability.
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Related terms
10Y Treasury · Altman Z-Score · Asset Sensitivity · Basel III · Bond ETF · Bretton Woods
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