In search of lost time: Examining the duration of growth-reducing sudden stops

•This paper revisits the fix vs flex debate, for which the econometric evidence is still ambiguous.•Instead of focusing solely on the output costs of sudden stops, as others have done, we try to understand their duration.•We find very strong evidence that floating regimes abbreviate the duration of sudden stops. This paper investigates the duration of sub-par growth spells associated with sudden stops in private capital flows. Our key finding is that countries featuring floating exchange rate regimes experience shorter growth-reducing sudden stops than countries with more rigid regimes. The estimated effect is large: countries with flexible exchange rate regimes are at least 50 percent more likely to exit a growth-reducing sudden stop. Our results withstand a number of robustness checks, including: controlling for banking crises and initial levels of debt, and introducing unobserved heterogeneity. The paper revisits the heated policy debate of the 1990s on fixed vs. flexible exchange rate regimes from a different angle and uncovers another important shock absorber role of flexible exchange rates.