The exchange rate is a good example, consistent with Sumner's price of money approach. His claim probably has it origins in the various price/interest rate puzzles found in the literature, but I suspect most of those puzzles stem from their reliance on official interest rates as a measure of the stance of monetary policy. If that stance is incorrectly identified, it is no surprise that the IRFs make no sense. See my review of Sumner: https://stephenkirchner.substack.com/p/book-club-scott-sumners-alternative
The exchange rate is a good example, consistent with Sumner's price of money approach. His claim probably has it origins in the various price/interest rate puzzles found in the literature, but I suspect most of those puzzles stem from their reliance on official interest rates as a measure of the stance of monetary policy. If that stance is incorrectly identified, it is no surprise that the IRFs make no sense. See my review of Sumner: https://stephenkirchner.substack.com/p/book-club-scott-sumners-alternative
Yeah identifying exogenous shocks is really hard - and the focus on interest rates doesn't make it any easier!