dysfunction

Introduction. One of the serious consequences of capital market dysfunction which exists in Iraq›s economy is the imbalance of its sectoral structure. Hypertrophied development of extractive industries leads to inefficient investment activity, weak capital formation, and unsustainable economic growth. Overcoming these destructive dysfunctions in financial and investment sphere of Iraq›s economy is an urgent task of the state financial and investment policy. The necessity and possibility of solving this problem is the subject of the article presented. Theoretical analysis. The article presents approaches to assessment of impact of state financial and investment policies on development of investment activities, functioning of capital market and economics in general, and formation of its balanced structure.Empirical analysis based on the assessment of results of functioning of Iraq’s economy for the period from 2005 to 2016, and the analysis of the most important directions of the state economic policy of Iraq. Results. The ambiguous role of the state financial and investment policy in overcoming the dysfunctions of capital market has been revealed. Effective state economic policy allows to reduce the destructive consequences of the functioning of capital market. However, the ineffective financial and investment policy itself is capable of generating dysfunctions.