The effects of oil prices on inflation, interest rates and money

Recently, most of the relevant studies (see, e.g. Atukeren [5], Ayadi [6], Roeger [38], Trehan [44], Bermingham [7], Oladosu [34]) have focused on oil price shocks to the economy variables such as GDP, interest rates, inflation, and industrial production, but few studies have focused on external shocks to the possible reaction of monetary policies. Thus, this paper includes money variables in empirical models and investigates the relationships among oil prices, inflation, interest rates and money. The monetary policy might take time to be effective, so the concerns of lag-chosen issues will be vital issues from the aspect of this research. Then, different lag-chosen criteria and symmetric and asymmetric lag-lengths chosen are placed in a stressed situation in this study with regard to monetary lag concerns. We find that the empirical results are quite robust concerning various lag-chosen criteria, symmetric and asymmetric models, and different time series models. So, it implies that monetary policies still matter after accounting for the oil prices, the energetic variable, with the above robustness concerns.