Hi Andrei, I don't think you should be concerned. Your model without the fixed effects is telling you that first order autoregressive serial correlation is relatively muted and with the fixed effects your best guess is that there is essentially no serial correlation. This second result isn't 'bad', for example, it is what you would get if you simulated some panel data that really had no serial correlation in the errors. You might find it useful at this point to investigate some of the tests out there for higher order autoregressive serial correlation (Wooldridge 2006 and Greene both have some). Iain On Thu, Apr 29, 2010 at 5:43 AM, Andrei Roman <acromanya at gmail.com> wrote: