This study investigates the linkage between long-run and short-run dynamics of exchange rate determination for the German mark/U.S. dollar quarterly rate for the period 1973-1990. Earlier investigations failed to explicitly take into account the possible nonstationarity of the data set they were using. This study continues the work performed in this area by applying modern econometric techniques to empirical tests of the Dornbusch model. In essence, this study revives the monetary model and determines if the empirical analysis using the German/U.S. case derives elements which are compatible with the monetary theory of exchange rate determination.