capital flight investment & finance definition

The exodus of large sums of money from a country that is experiencing political or economic turmoil. Funds typically flee to a safe haven, such as the U.S. Treasury bond market. Capital flight is very disruptive because it tends to multiply on itself. That is, if one country is experiencing turmoil, then there is the danger that investors will pull their funds from other countries in the region to avoid potential future losses. The term is associated with smaller, emerging market economies, such as Asia Pacific in 1997 and 1998, Russia in 1998, and countries in Latin America at many different times. In contrast, an investment outflow indicates that money is leaving a country in a more orderly fashion.