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ess increase in oil prices then inflation rate rises to a very high proportion. The two things are discussed in this paper. First one is that the effect of increasing oil prices on inflation. And finally he reaches that results that both have positive relationship between oil prices and inflation.

Jockos Rauvata in his article discussed that both inflation and increase in oil prices have positive effect on the economy. He is of the view that when oil prices increases inflation also increases in large proportion as compared to oil prices. He tries to study the relationship between oil prices and inflation and also want to know what are the causes of increase in price. The results shows that there exist positive relationship between oil prices and inflation.

Ramiz ur Rehman; Muhammad Ateeq ur Rehman; Awais Raoof (2010) in their study investigates the relationship between the interest rate, exchange rate and inflation. a simple multiple regression model is applied to see the relationship of inflation and interest rate with exchange rate as inflation and interest rate are taken as independent and exchange rate is taken as dependent variable. a monthly based data is examined for this purpose for Pakistan and united Kingdom. The results of this study reflect that there is a significant positive relation between inflation and exchange rate of UK and Pakistan but significant negative relation of interest rate and exchange rate of Pakistan and UK.

Brown and Yucel, for example, constucted a vector autoregressive (VAR) model of the U.S economy similarly to BGW model and he found that the rise in oil prices shock the economy responds with the reduction in real GDP and rise in interest rates and in the price level. Since the decline in real GDP and the rise in deflator are similar in magnitude, so that nominal GDP remains relatively constant, the findings that confirms to Robert Gordon——s def of the Monetary neutrality- the federal reserve seems to have been neutral to oil price increases. Since they observec taht if the federal fund rate is held constant after an oil price increase in real GDP, the price level and nominal GDP increases , they argued that U,S monetary poicy has probably had no role in worsenig the effect of past oil price shocks.

Atif Ali Jaffri (2009) investigates the exchange rate changes on consumer prices in Pakistan for both short run and long run and find that the exchange rate changes has very little effect on consumer prices in Pakistan. The impact of foreign inflation on domestic inflation is positive and statistically significant. This study is for the period 1995M1 to 2009M3.

Jeannine Bailliu and Eiji Fujii (June 2004) study on the exchange rate pass-through and the inflation environment in industrialized countries It is much different from other studies in the sense that it uses the panel data approach. Panel data set of 11 industrialized countries over the period from 1977 to 2001 is used to check the hypothesis that exchange rate pass-through declines with a shift to a low inflation by a change in the monetary policy. Evidence supports this hypothesis. also pass-through to import, producer, and consumer price inflation declined in many industrialized countries in the early 1990s for inflation stabilization.

Berument and Tasc (2002) investigated effect of oil prices in Turkey and found that when wages and other three factors of inc