Monetary Response to Oil Price Shock in Asian Oil Importing Countries: Evaluation of Inflation Targeting Framework

Oil price shock can have serious inflation consequences and, therefore, elicit timely response from the Central Banks (CB). Our paper analyses monetary policy to oil prices in 5 Asian EMDEs during 2008–2019. Not only these countries are heavily dependent on imports for their increasing demand oil, but also CBs of gradually adopted targeting (IT) framework policy. Therefore, it is imperative examine weightage assign shock, while operating IT-framework as against non-IT-framework. This forms second important objective our paper. We estimate CBs’ decision interest rates Brent crude using augmented Taylor rule, a macro panel data framework. employ estimators that allows heterogeneity across and robust cross sectional dependence. importing face negative supply due trade linkages, exerts greater impact inflation. Consequently, finding raised prevent subsequent effects long run, intuitive. Interestingly, results reveal following resorted setting at lower level shock. asserts efficacy terms absorbing shocks.