Lagged dependent variable and serially correlated residuals

[dm90]

I gather from reading various textbooks that the combination of a lagged dependent variable and serially correlated residuals is likely to lead to inconsistent estimators. Would this still be the case if I included an MA(1) term, so that the first order serial correlation is corrected for? If not then what would be the best way to proceed?

[startz]

It is more likely that you want to use AR(1). But so long as you properly specify the ARMA terms, EViews will get the estimation right.