Foreign and domestic capital flight

We have talked a about how uncertainty over a currency's value might lead to foreign capital fleeing a country. Nobody wants to be left "holding the bag" of cash after the hypothetical peso declines in value. This is true, but in the discussion, we may have been overlooking something that is also important: domestic capital. That is, citizens of [insert real country name here] Pesolandia might look to put their savings in dollars or another "hard currency" so they are not left holding the bag.

In other words, just a note that capital flight out of a developing country at a time of crisis may come from either international or domestic sources. And in some cases, it may be the latter that is more significant.