In practice, however, the nominal effective exchange rate, which is not inflation-adjusted, is more frequently used, for the following reasons: First, it is hard to settle on a universally accepted and comparable price index. Though commonly used, the CPI may not be appropriate according to academicians as it includes prices of many non-tradables.
Other options, such as PPI, GDP deflator and the index of per unit labor cost, are not widely accepted. Second, the calculation of real effective exchange rate has to deal with the time lag and availability of data, and price indices such as the CPI are subject to time lags and comparability.