Financial crises seem to have become the norm rather than the exception since 1992. The author examines the impact of a crisis of confidence and resultant capital outflows from a small and open economy and the possible policy options in response to such outflows, using simple tools and definitions that will be familiar to any money and banking or intermediate macroeconomics student. Examples are drawn from the East Asian crisis of 1997-98 (Indonesia, Korea, Malaysia, and Thailand), although the analysis remains pertinent to emerging economies in general. (Contains 10 figures and 20 endnotes.)