Giacomini, Raffaella, and Clive Granger. “Aggregation of Space-Time Processes”. Boston College Working Papers in Economics 582, 2002.
In this paper we compare the relative efficiency of different methods of forecasting the aggregate of spatially correlated variables. Small sample simulations confirm the asymptotic result that improved forecasting performance can be obtained by imposing a priori constraints on the amount of spatial correlation in the system. We also show that ignoring spatial correlation, even when it is weak, leads to highly inaccurate forecasts.