In this paper we review what is known about exchange rate crises. We then draw out lessons for the choice of exchange rate regime. We show the dilemmas of exchange rate management are particularly acute for small, open developing economies. Freely floating exchange rates are not tolerable for such countries because their markets are thin, their exchange rates would be volatile, and their trade and production would be severely disrupted. But fixed exchange rates are not viable either because they would be highly susceptible to destabilizing speculative attack. Larger neighbors, for whom international transactions are less important, will have little reason to contemplate stabilizing their exchange rates against one another. This scenario points to eventual emergence of a world organized around three currency zones centered on the United States, Western Europe and Japan.