This study examines the relationship between oil prices uncertainty, exchange rate volatility and inflation by taking the monthly data from 1972-M6 to 2015-M12. At the first stage different GARCH-specifications have been applied on the return series of the oil prices and exchange rate. The results show positive and statistically significant impact of oil prices uncertainty on the exchange rate volatility by capturing the asymmetries in terms of negative and positive shocks. This positive impact suggests that the rising oil prices leads to the increase in exchange rate i.e., depreciation of the exchange rate and vice versa. In the next stage in order to test the time series properties the Beaulieu and Miron (1992) seasonal unit root has been applied. Oil prices and exchange rate are stationary at the first difference and inflation is stationary at level. Then, for the long-run and short-run co-integration relationship among the variables the ARDL technique has been applied. The results of the co-integration technique show the positive and statistically significant impact of oil prices on the consumer prices i.e., rising oil prices leads to increase in consumer prices and vice versa. On the other hand the exchange rate has positive and statistically insignificant impact on the consumer prices in long-run and short-run except at its second lag where the exchange rate has significant impact on the consumer prices. The positive impact of exchange rate on consumer prices implies that the rise in exchange rate i.e., depreciation of the exchange rate leads to rise in the consumer prices of the country and vice-versa. In the last stage the total effect of oil prices on consumer prices is decomposed into direct and indirect effects. Exchange rate is used as a mediator and for testing its mediating role the Sobel test is applied. The total effect of oil prices on consumer prices in the presence and absence of exchange rate is positive i.e., higher oil prices will cause higher consumer prices and vice-versa. Supervisor:- Dr. Ahsan Ul Haq Satti