Information provided by Owens Corning. 
For existing walls, there's no need to tear down and rebuild.  Simply have an insulation contractor seal them with loose-fill blown insulation.  <         >

For new homes and remodeling, FOAMULAR® rigid foam insulation is best for exterior walls.  It's the best for saving energy with its extra insulating power.  FOAMULAR insulation can be attached directly to the studs or over exterior plywood. 

Exterior walls are built using 2x6 studs or 2x4 studs.  Because the 2x6 studs give the wall more depth, it allows more insulation to be used.  If you have a specific R-value* you would like to use, you may use either of these two types:  5 1/2" thick R-21, or 6 1/4" R-19 fiber glass batt insulation.  However, condensing it into a 2x6 space will lower its R-value to R-18. 2x4 studded walls, have the options of R-15 or R-13, which are both 3-1/2 inches thick.
             *R-value is the measurement of resistance to heat flow.  The higher the R-value, the more the material
                  absorbs heat, therefore slowing the transfer of heat through it.  

Installation:

1. For standard wall heights, you should use pre-cut batts rather than continuous rolls. Each piece of insulation is cut to the size of the most typical framing, which usually is built either 16 or 24 inches on center and about 92 inches high. These cut-to-size batts will make for a faster and easier job.

2. The insulation should fit snug and leave no space between the studs; top and bottom. If needed, cut the insulation around electrical boxes, plumbing and plumbing vent lines, etc., leaving as little space as possible.