We build a model of internal and external balances (IB/EB) that is tailored to resource rich developing countries (RRDCs). The model incorporates resource and non-resource sectors, taxation regimes of these sectors, and other key features of the economy unique to RRDCs such as commodity price volatility, pro-cyclical government spending, that the resource sector is an enclave, and that resource projects undergo different stages in terms of revenue accrual to the government over their lifetime. We use this model to study the implications of various mining fiscal regimes—resource rent tax vs. a royalty-based setup for example—in relation to real exchange rate dynamics, exchange rate policy, and macroeconomic stability in these economies. Using a new database on resource revenue in RRDCs, the empirical section tests the various predictions of the model.