  Macro shocks are often composites, yet overlooked in the impulse response
analysis. When an instrumental variable (IV) is used to identify a composite
shock, it violates the common IV exclusion restriction. We show that the Local
Projection-IV estimand is represented as a weighted average of component-wise
impulse responses but with possibly negative weights, which occur when the IV
and shock components have opposite correlations. We further develop alternative
(set-) identification strategies for the LP-IV based on sign restrictions or
additional granular information. Our applications confirm the composite nature
of monetary policy shocks and reveal a non-defense spending multiplier
exceeding one.
