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Monetary Policy and Oil Prices

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  • Monadjemi Mehdi S.

    (University of New South Wales)

Abstract

Because of volatility, commodity prices are excluded from the CPI when inflation targeting is exercised. Rising commodity prices contribute to inflation but central banks show no reaction since the CPI does not register rise in prices. Frankel (2006) argues that monetary policy should consider the price of important export commodities such as oil, in oil exporting countries. He maintains that by doing so, central banks are able to benefit from the fluctuations of the exchange rate in the presence of a negative international trade shocks. Central banks cannot benefit from the fluctuation of the exchange rate if inflation targeting is the strategy for conducting monetary policy.

Suggested Citation

  • Monadjemi Mehdi S., 2011. "Monetary Policy and Oil Prices," Global Economy Journal, De Gruyter, vol. 11(3), pages 1-18, September.
    • Handle: RePEc:bpj:glecon:v:11:y:2011:i:3:n:8
    DOI: 10.2202/1524-5861.1730
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    References listed on IDEAS

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    Cited by:

    1. Mehdi S. MONADJEMI, 2017. "Great Crash of 2008 and Oil Price Rise," Expert Journal of Economics, Sprint Investify, vol. 5(1), pages 14-19.
    2. Mehdi Siamak MONADJEMI & John LODEWIJKS, 2014. "Post Inflation Targeting Monetary Policy: A Study of Britain, Japan and the United States," Expert Journal of Economics, Sprint Investify, vol. 2(1), pages 21-29.

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