Abstract: The majority of literatures dealing with digital signal processing ignore the effect of oscillator instabilities. This will in some cases lead to an inadmissible design mistake.In this paper, Monte Carlo computer simulation is used to estimate the effect of oscillator instabilities on signal processing. The key link of this method is generating high quality random number sequence simulating the phase noice of oscillator. The case of pulse compression performance is discussed as an example in order to clarify:(1) the effect of oscillator instabilities on pulse compression performance, and (2) the requirement of oscillator frequency stability when the tolerance of the system performance is known. Finally, some computer simulation examples are given which will provide as reference data for engineering designers.