THE IMPACT OF STATE REGULATION ON THE FORMATION OF THE STATE'S INVESTMENT POLICY

It has been established that, to a large extent, the dynamics of the structure and the volume of Ukraine’s real investments have been shaped by the investment policies pursued by the Government over different periods. High transaction costs and incomplete information disclosure in Ukraine give rise to significant moral hazard and adverse selection among institutional firms. The root cause lies in the weakness and corruption of the country’s regulatory institutions. This does not mean, however, that Ukraine lacks regulatory bodies or that they fail to cover all areas typically regulated in a modern market economy. The Ukrainian insurance system displays features of a transfer mechanism rather than a system of insurance funds, and continues to generate both economic and social challenges: low pension and welfare payments, as well as inadequate healthcare provision. Moreover, this deprives the Ukrainian economy of a major potential source of investment capital—resources accumulated by social insurance funds—which is atypical for a modern market economy. It should be emphasized that Ukraine’s current institutional framework is far from optimal. This is largely due to the absence of the rule of law in the sphere of private and public relations, the lack of a high-quality judiciary, the low representativeness of political institutions, underdeveloped social partnership, and insufficient social insurance coverage.