This note re-examines the flexible-price monetary approach to the exchange
rate between the Korean won and the three key currencies : the US dollar, t
he German mark and the Japanese yen. The note reports the important finding
s. First, at least one cointegrating vector exists, which indicates that an
unrestricted flexible-price monetary model is a valid framework for analys
ing the long run exchange rate. Second, it is found that some popular monet
ary restrictions on this model are valid for the Korean won-German mark rat
e and the Korean won-Japanese yen rate: especially all variables in the mod
el are correctly signed and mostly statistically significant for the Korean
won-German mark rate.