THE INTERCONNECTION BETWEEN INSTITUTIONAL-ECONOMIC COMPONENTS AND ECONOMIC PROCESSES

The study examines the importance of political and economic institutions for a country's economic development. The primary focus is on how political institutions shape economic institutions, which, in turn, influence economic growth, stability, and societal well-being. Two primary types of political and economic institutions are analyzed: inclusive and extractive. Inclusive institutions ensure equal access to resources and stimulate economic development by enabling all segments of the population to participate in economic processes. In contrast, extractive institutions limit economic activity for large segments of the population, leading to stagnation or slowed development. The object of the research is institutional and economic components and their impact on the country’s economic processes. The paper describes in detail the role of economic institutions in creating, regulating, stabilizing, and legitimizing the market. Examples of institutional functions, such as property protection, ensuring freedom of enterprise, and regulating foreign trade, are provided, all of which contribute to innovation and the competitiveness of the economy. The consequences of market failures and the neglect of leaders in poor countries, which hinder the effective use of economic resources, are also analyzed. Special attention is given to the characteristics of economic processes such as production, distribution, exchange, and consumption. The impact of economic activity on the standard of living, employment opportunities, entrepreneurship, and innovation development is highlighted. The interdependence between economic processes and investments that promote stability and economic growth is explored. A particular emphasis is placed on analyzing the impact of institutional components on economic processes in the context of Ukraine. In this regard, institutional and economic changes before and after the onset of Russia’s military aggression in 2022 are compared. Prior to the aggression, the country was integrating into the European Union, reforming its legal framework and economic structures. After the war began, institutional challenges intensified significantly, affecting economic stability, resource mobilization, and prospects for economic recovery after the conflict.