The paper evaluates the role of the fixed and floating exchange rate regimes in stabilizing the economy. The analysis is based on a standard model (two markets: money and goods market) of a small open economy, i.e. one which does not influence the world price level, interest rates or GDP. The respective systems are assessed according to their ability to stabilise the GDP level (versus potential GDP) and the price level (versus the desired level) in the face of various temporary economic shocks relating to either demand for money, demand for domestic goods or supply. External shocks fall into the second and third category. The analysis presented is in fact an exercise in comparative statics. In other words, the GDP and price levels in the original equilibrium position are compared against those levels in the new equilibrium position, towards which the economy develops in response to the particular type of shock. The analysis, modeled after Poole's analysis of 1970, is illustrated with graphics. The concluding part presents a ranking of the exchange rate regimes. No obvious solutions seem to exist - the choice of the exchange rate regime depends on the preferences of the authorities, the type of shock as well as the structural features of a given economy. The findings suggest that the managed float regime might be the most appropriate. This is because it allows the exchange rate to be treated as either fixed (providing for central bank's FX interventions) or determined by the market - depending on the type of the shock affecting the economy. The final part briefly discusses the reservations to the reasoning presented and suggested further areas to be explored with respect to the subject.