"An open-book exam still distinguishes good students from poor ones..."

"... is preferred by the students, does not seem to decrease learning and retention, and decreases anxiety levels."

Says a new study, which you can read here (PDF). I found that via The Chronicle of Higher Education, but you can't get to that article without a subscription.

I do open-book exams, by the way, and for precisely the reason stated above.

ADDED: If you don't want the test to be a test of who's most susceptible to anxiety, you've got to go with open book, right? It's not that simple. Knowing it's open book may help students feel calm before the exam and save them from devoting study time to ensuring memorization, but there's still the experience of seeing the exam question and knowing you're pressed for time. There's that big book to consult. Are you leafing through it, wondering where the answers are, while others are already writing?