Abstract
This study aims to investigate the impact of local and global business cycles on different sectors of Pakistani industry, using annual time series data of sales and profits on ten major nonfinancial industries over the period 1976–2017. The sensitivity of Pakistani industry to local and and global business cycles remains largely unaddressed. This paper has estimated the exposure of each industry with respect to local and global GDP using the seemingly unrelated regression (SUR) estimator. The results indicate that the industrial sector in Pakistan is largely nondiversified and is vulnerable to local and global recession. The cement, chemicals, engineering, fuel and energy, and transport and communication sectors are found to be procyclic with respect to local GDP growth, while the cement, chemicals, fuel and energy, paper and board, sugar, textiles, and transport and communication industries are found to be noncyclic with respect to global GDP growth. From our analysis of the financial sector, it is found that exchange companies, investment banks, and mutual funds provide a safe haven from the risk of global recession for business and investors, since these industries are countercyclic to global business cycles.