Interest in the relationship between the exchange rate and prices is motivated by the need to assess how changes in the value of a country’s currency affect its external balance and the rate of inflation. Under the assumption of perfectly elastic export supply schedules, the full effect of a devaluation of a country’s currency would be ‘passed through’ to local currency import prices.

This paper investigates the relationship between the monetary regime: pegged, currency board and dollarization and the exchange rate pass through for a sample of developing economies in Latin America and Sub-Saharan Africa. The research has implications for regional integration in Africa. Since the 1990’s the question of Monetary Union has taken center stage in Sub-Saharan Africa as the ultimate goal for the full integration of African economies. Reducing inflation, macro stability and policy credibility are prerequisites for monetary union. The potential differences in pass through rates for Sub-Saharan Africa countries will shed light on the feasibility of a monetary union.