Furthermore, Castillo et al. [11] not only show that oil pricevolatility can generalize sizeable levels of average inflation, but alsosuggest that a more conservative monetary policy could mitigateM.-H. Wu, Y.-S. Ni / Energy 36 (2011) 4158e4164 4159those effects. Oppositely, Askari and Krichene [4] indicate thatmonetary policy variables, such as interest rates and exchangerates, have a powerful effect on oil markets. Their results show thatmonetary policy affects oil markets through the channel of theinterest rates and the exchange rates, and the interest rates havesignificant impacts on oil demand. Moreover, Carlstrom and Fuerst[10] discuss the efficiency of different U.S. federal fund ratemovements in response to oil price increases, and show thatincreasing oil prices will raise the inflation rate
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