Financing the Future: Rethinking Public Investment in an Era of Fiscal Uncertainty and Sustainable Development
Keywords:
Public Investment, Fiscal Uncertainty, Fiscal Sustainability, Economic Growth, Public Finance, Sustainable Development.
Abstract
This study examines public investment financing amid fiscal uncertainty and sustainable development through a Systematic Literature Review (SLR) approach. A total of 50 international journal articles published between 2021 and 2026 were analyzed using the PRISMA framework. The findings highlight four interconnected dimensions: fiscal sustainability and investment financing, the contribution of public investment to economic growth and productivity, institutional governance and resource allocation, and sustainable development. The synthesis indicates that public investment can strengthen economic capacity, stimulate private sector participation, and improve social welfare when supported by effective financing strategies and institutional governance. However, fiscal constraints, public debt pressures, economic uncertainty, and investment inefficiencies remain significant challenges. This study contributes to public finance literature by integrating fiscal sustainability, investment efficiency, and intergenerational development into a comprehensive understanding of public investment financing.
References
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Alessi, L., Duranovic, A., Kvedaras, V., & Monasterolo, I. (2025). From risks to opportunities: The impact of green public investment programs on sovereign yields. Research in International Business and Finance, 77, Article 102866. https://doi.org/10.1016/j.ribaf.2025.102866
Ardanaz, M., Llempén López, Z., Puig, J., & Valencia, O. (2025). Public investment multipliers and the role of efficiency: New evidence for emerging markets. Journal of Macroeconomics, 86, Article 103705. https://doi.org/10.1016/j.jmacro.2025.103705
Baussola, M., & Carvelli, G. (2023). Public and private investments: Long-run asymmetric effects in France and the US. Finance Research Letters, 58, Article 104317. https://doi.org/10.1016/j.frl.2023.104317
Blesse, S., Dörr, L., Dorn, F., & Lay, M. (2026). Do fiscal rules undermine public investments? A review of empirical evidence. European Journal of Political Economy, 91, Article 102775. https://doi.org/10.1016/j.ejpoleco.2025.1 02775
Butkus, M., Cibulskiene, D., Garsviene, L., & Seputiene, J. (2021). The heterogeneous public debt–growth relationship: The role of the expenditure multiplier. Sustainability, 13(9), Article 4602. https://doi.org/10.3390/ su13094602
Chatterjee, S., Lebesmuehlbacher, T., & Narayanan, A. (2021). How productive is public investment? Evidence from formal and informal production in India. Journal of Development Economics, 151, Article 102625. https://doi.org/10.1016/j.jdeveco.2021. 102625
Chen, Y., Deng, L., Fujio, M., & Khan, M. A. (2026). Irreversible investment in divided times: Complementarity and public good provision. Journal of Public Economics, 262, Article 105768. https://doi.org/10.1016/j.jpubeco.2026 .105768
Ciaffi, G., Deleidi, M., & Di Domenico, L. (2024). Fiscal policy and public debt: Government investment is most effective to promote sustainability. Journal of Policy Modeling, 46, 1186–1209. https://doi.org/10.1016/j.jpolmod. 2024.07.002
Cusato Novelli, A., & Barcia, G. (2021). Sovereign risk, public investment and the fiscal policy stance. Journal of Macroeconomics, 67, Article 103263. https://doi.org/10.1016/j.jma cro.2020.103263
Dissou, Y., & Ma, S. (2026). Public investment and real exchange rate dynamics: The role of public capital productivity. Economic Modelling, 155, Article 107451. https://doi.org/10.1016/j.econmod.2025.107451
Efthimiadis, T., & Tsintzos, P. (2023). From debt to green growth: A policy proposal. Sustainability, 15(4), Article 3506. https://doi.org/10.3390/su1504 3506
Espinoza, R., & Presbitero, A. F. (2022). Delays in public investment projects. International Economics, 172, 297–310. https://doi.org/10.1016/j.inteco.202 1.10.002.
Feldman, N., Kawano, L., Patel, E., Rao, N., Stevens, M., & Edgerton, J. (2021). Investment differences between public and private firms: Evidence from U.S. tax returns. Journal of Public Economics, 196, article 104370. https://doi.org/10.1016/j.jpubeco.2021.104370
Francois, J. N., Konte, M., & Ruch, F. U. (2026). "Crowding in" effect of public investment on private investment revisited. Journal of International Money and Finance, 164, Article 103567. https://doi.org/10.1016/j.jimonfin.2026.10 3567
Goemans, P. (2023). The impact of public consumption and investment in the euro area during periods of high and normal uncertainty. Economic Modelling, 126, article 106370. https://doi.org/10.1016/j.econmod.2023.106370
Gu, Y., Ho, K.-C., Yan, C., & Gozgor, G. (2021). Public environmental concern, CEO turnover, and green investment: Evidence from a quasi-natural experiment in China. Energy Economics, 100, Article 105379. https://doi.org/10.1016/j.eneco.2021.105379
Gurara, D., Kpodar, K., Presbitero, A. F., & Tessema, D. (2021). On the capacity to absorb public investment: How much is too much? World Development, 145, Article 105525. https://doi.org/10.1016/j.worlddev.2021.105525
Haller, A.-P., & Dragolea, L.-L. (2026). The dynamics of public investment in education and debt under economic, digital, and sustainable transformation in the EU27. Administrative Sciences, 16(7), Article 317. https://doi.org/10. 3390/admsci16070317
Izquierdo, A., Lama, R., Medina, J. P., Puig, J., Riera-Crichton, D., Végh, C., & Vuletin, G. (2026). How effective is public investment in stimulating output? Journal of International Money and Finance, 169, Article 103642. https://doi.org/10.1016/j.jimonfin.2026.103642
Jalles, J. T. (2026). Environmental public investment and fiscal countercyclicality: Resilience channels and cross-country evidence. Economic Modelling, 163, Article 107753. https://doi.org/10.1016/j.econmod.2026.107753
Jalles, J. T., Park, D., & Qureshi, I. (2024). Public and private investment as catalysts for growth: An analysis of emerging markets and developing economies with a focus on Asia. Journal of International Money and Finance, 148, Article 103166. https://doi.org/10.1016/j.jim onfin.2024.103166
Kamenya, M. A., Hendriks, S. L., Gandidzanwa, C., Ulimwengu, J., & Odjo, S. (2022). Public agriculture investment and food security in ECOWAS. Food Policy, 113, Article 102349. https://doi.org/10.1016/j.foodpol.2022.102349
Kamiguchi, A., & Tama, T. (2023). Public investment, national debt, and economic growth: The role of debt finance under dynamic inefficiency. Journal of Macroeconomics, 77, Article 103535. https://doi.org/10.1016/j.jmacro.20 23.103535
Kanazawa, N. (2021). Public investment multipliers: Evidence from stock returns of the road pavement industry in Japan. Journal of Economic Dynamics and Control, 133, Article 104247. https://doi.org/10.1016/j.jedc.2021.104247
Kushawaha, D., & Jain, M. (2025). Understanding the dynamics of public debt on renewable energy investment in developing countries. Energy Economics, 147, Article 108500. https://doi.org/10.1016/j.eneco.2025.108500
Mancini, A. L., & Tommasino, P. (2023). Fiscal rules and the reliability of public investment plans: Evidence from local governments. European Journal of Political Economy, 79, Article 102415. https://doi.org/10.1016/j.ejpoleco.202 3.102415
Marín-Rodríguez, N. J., Gonzalez-Ruiz, J. D., & Peña, A. (2024). Analyzing fiscal sustainability in Latin American countries: A time–frequency perspective. Economies, 12(5), Article 111. https://doi.org/10.3390/economies12050111
Matvejevs, O., & Tkacevs, O. (2025). Invest one – get two extra: Public investment crowds in private investment. European Journal of Political Economy, 90, Article 102384. https://doi.org/10.1016/j.ejpoleco.2023.102384
Menguy, S. (2025). How harmful is a high share of public expenditure in GDP? Economies, 13(3), Article 74. https://doi.org/10.3390/economies13030074
Ocolișanu, A., Dobrotă, G., & Dobrotă, D. (2022). The effects of public investment on sustainable economic growth: Empirical evidence from emerging countries in Central and Eastern Europe. Sustainability, 14(14), Article 8721. https://doi.org/10.3390/su14148721
Paczos, W., Sawulski, J., & Leśniewicz, F. (2023). How much do public and private sectors invest in physical and human capital? Towards a new classification of investments. International Review of Economics and Finance, 88, 1324–1336. https://doi.org/10.1016/j.iref.2023.0 7.010
Pallante, G., Russo, E., & Roventini, A. (2023). Does public R&D funding crowd-in private R&D investment? Evidence from military R&D expenditures for US states. Research Policy, 52, Article 104807. https://doi.org/10.1016/j.r espol.2023.104807
Papagni, E., Lepore, A., Felice, E., Baraldi, A. L., & Alfano, M. R. (2021). Public investment and growth: Lessons learned from 60-years experience in Southern Italy. Journal of Policy Modeling, 43, 376–393. https://doi.org/10.1016/j.jpolmod.2019.12.003
Peng, D., Farooq, U., Alam, M. M., & Khudoykulov, K. (2024). Exploring the role of governance in determining public-private investment in energy: New empirical insights from ASEAN. Socio-Economic Planning Sciences, 96, Article 102096. https://doi.org/10.1016/j.seps. 2024.102096
Petrović, P., Arsić, M., & Nojković, A. (2021). Increasing public investment can be an effective policy in bad times: Evidence from emerging EU economies. Economic Modelling, 94, 580–597. https://doi.org/10.1016/j.econmod.2020 2020.
Shao, J., & Wang, Y. (2026). Public data openness, business environment improvement and foreign direct investment inflow into China. International Review of Economics and Finance, 110, Article 105556. https://doi.org/10.1016/j.iref.2026.105556
Shi, H., Song, D., & Ramzan, M. (2025). Institutional quality, public debt, and sustainable economic growth: Evidence from a global panel. Sustainability, 17(14), Article 6487. https://doi.org/10.3390/su17146487
Su, T. D., & Nguyen, C. P. (2021). Twin balances, public governance and private investment: Quantile estimation for OECD countries. International Economics, 165, 85–93. https://doi.org/10.1016/j.inteco.2020.12.004
Sánchez, M. V., Cicowiez, M., & Ortega, A. (2022). Prioritizing public investment in agriculture for post-COVID-19 recovery: A sectoral ranking for Mexico. Food Policy, 109, Article 102251. https://doi.org/10.1016/j.foodpol.2022 .102251
Takahashi, M., Takaku, R., Ashida, T., & Ibuka, Y. (2025). Public investment on health and voter responses: Evidence from the mass vaccination during COVID-19. European Journal of Political Economy, 89, Article 102718. https://doi.org/10.1016/j.ejpoleco.2025.102718
Boys, T. (2026). Public investment, economic growth, and wealth distribution. Journal of Economic Dynamics and Control, 184, article 105280. https://doi.org/10.1016/j.je dc.2026.105280
Wang, F., Chen, X., & Yang, G. (2025). Fiscal expenditure responsibilities of public-private partnerships and corporate innovation investment—evidence from prefecture-level cities in China. China Journal of Accounting Research, 18, Article 100416. https://doi.org /10.1016/j.cjar.2025.100416
Wang, J., & Xia, W. (2022). Public attention and investment efficiency: Incentive effect or deterrent effect? Analysis on heterogeneous bilateral stochastic frontier model. Technological Forecasting and Social Change, 185, Article 122043. https://doi.org/10.1016/j.techfore.2022.122043
Wang, Y., & Li, J. (2024). How public service investment affects public incomes: Evidence from Shanghai, China. Sustainability, 16(13), Article 5562. https://doi.org/10.3390/su16135562
Yuen, T. H. A., & Yuen, W. K. T. (2024). Public investment on renewable energy R&D projects: The role of geopolitical risk, and economic and political uncertainties. Energy Economics, 138, Article 107837. https://doi.org/ 10.1016/j.eneco.2024.107837
Zhang, S., Cai, R., & Wang, S. (2025). Impact of public investment on agricultural productivity growth: Evidence from China. Economic Analysis and Policy, 85, 1442–1455. https://doi.org/10.1016/j.eap.2025.02.005
Zheng, F., Lin, H., Liu, B., & Fei, R. (2026). Scrutiny and spending shifts: How participatory budgeting reduces local government debt. Sustainability, 18(1), Article 399. https://doi.org/10.3390/su18010399
Alessi, L., Duranovic, A., Kvedaras, V., & Monasterolo, I. (2025). From risks to opportunities: The impact of green public investment programs on sovereign yields. Research in International Business and Finance, 77, Article 102866. https://doi.org/10.1016/j.ribaf.2025.102866
Ardanaz, M., Llempén López, Z., Puig, J., & Valencia, O. (2025). Public investment multipliers and the role of efficiency: New evidence for emerging markets. Journal of Macroeconomics, 86, Article 103705. https://doi.org/10.1016/j.jmacro.2025.103705
Baussola, M., & Carvelli, G. (2023). Public and private investments: Long-run asymmetric effects in France and the US. Finance Research Letters, 58, Article 104317. https://doi.org/10.1016/j.frl.2023.104317
Blesse, S., Dörr, L., Dorn, F., & Lay, M. (2026). Do fiscal rules undermine public investments? A review of empirical evidence. European Journal of Political Economy, 91, Article 102775. https://doi.org/10.1016/j.ejpoleco.2025.1 02775
Butkus, M., Cibulskiene, D., Garsviene, L., & Seputiene, J. (2021). The heterogeneous public debt–growth relationship: The role of the expenditure multiplier. Sustainability, 13(9), Article 4602. https://doi.org/10.3390/ su13094602
Chatterjee, S., Lebesmuehlbacher, T., & Narayanan, A. (2021). How productive is public investment? Evidence from formal and informal production in India. Journal of Development Economics, 151, Article 102625. https://doi.org/10.1016/j.jdeveco.2021. 102625
Chen, Y., Deng, L., Fujio, M., & Khan, M. A. (2026). Irreversible investment in divided times: Complementarity and public good provision. Journal of Public Economics, 262, Article 105768. https://doi.org/10.1016/j.jpubeco.2026 .105768
Ciaffi, G., Deleidi, M., & Di Domenico, L. (2024). Fiscal policy and public debt: Government investment is most effective to promote sustainability. Journal of Policy Modeling, 46, 1186–1209. https://doi.org/10.1016/j.jpolmod. 2024.07.002
Cusato Novelli, A., & Barcia, G. (2021). Sovereign risk, public investment and the fiscal policy stance. Journal of Macroeconomics, 67, Article 103263. https://doi.org/10.1016/j.jma cro.2020.103263
Dissou, Y., & Ma, S. (2026). Public investment and real exchange rate dynamics: The role of public capital productivity. Economic Modelling, 155, Article 107451. https://doi.org/10.1016/j.econmod.2025.107451
Efthimiadis, T., & Tsintzos, P. (2023). From debt to green growth: A policy proposal. Sustainability, 15(4), Article 3506. https://doi.org/10.3390/su1504 3506
Espinoza, R., & Presbitero, A. F. (2022). Delays in public investment projects. International Economics, 172, 297–310. https://doi.org/10.1016/j.inteco.202 1.10.002.
Feldman, N., Kawano, L., Patel, E., Rao, N., Stevens, M., & Edgerton, J. (2021). Investment differences between public and private firms: Evidence from U.S. tax returns. Journal of Public Economics, 196, article 104370. https://doi.org/10.1016/j.jpubeco.2021.104370
Francois, J. N., Konte, M., & Ruch, F. U. (2026). "Crowding in" effect of public investment on private investment revisited. Journal of International Money and Finance, 164, Article 103567. https://doi.org/10.1016/j.jimonfin.2026.10 3567
Goemans, P. (2023). The impact of public consumption and investment in the euro area during periods of high and normal uncertainty. Economic Modelling, 126, article 106370. https://doi.org/10.1016/j.econmod.2023.106370
Gu, Y., Ho, K.-C., Yan, C., & Gozgor, G. (2021). Public environmental concern, CEO turnover, and green investment: Evidence from a quasi-natural experiment in China. Energy Economics, 100, Article 105379. https://doi.org/10.1016/j.eneco.2021.105379
Gurara, D., Kpodar, K., Presbitero, A. F., & Tessema, D. (2021). On the capacity to absorb public investment: How much is too much? World Development, 145, Article 105525. https://doi.org/10.1016/j.worlddev.2021.105525
Haller, A.-P., & Dragolea, L.-L. (2026). The dynamics of public investment in education and debt under economic, digital, and sustainable transformation in the EU27. Administrative Sciences, 16(7), Article 317. https://doi.org/10. 3390/admsci16070317
Izquierdo, A., Lama, R., Medina, J. P., Puig, J., Riera-Crichton, D., Végh, C., & Vuletin, G. (2026). How effective is public investment in stimulating output? Journal of International Money and Finance, 169, Article 103642. https://doi.org/10.1016/j.jimonfin.2026.103642
Jalles, J. T. (2026). Environmental public investment and fiscal countercyclicality: Resilience channels and cross-country evidence. Economic Modelling, 163, Article 107753. https://doi.org/10.1016/j.econmod.2026.107753
Jalles, J. T., Park, D., & Qureshi, I. (2024). Public and private investment as catalysts for growth: An analysis of emerging markets and developing economies with a focus on Asia. Journal of International Money and Finance, 148, Article 103166. https://doi.org/10.1016/j.jim onfin.2024.103166
Kamenya, M. A., Hendriks, S. L., Gandidzanwa, C., Ulimwengu, J., & Odjo, S. (2022). Public agriculture investment and food security in ECOWAS. Food Policy, 113, Article 102349. https://doi.org/10.1016/j.foodpol.2022.102349
Kamiguchi, A., & Tama, T. (2023). Public investment, national debt, and economic growth: The role of debt finance under dynamic inefficiency. Journal of Macroeconomics, 77, Article 103535. https://doi.org/10.1016/j.jmacro.20 23.103535
Kanazawa, N. (2021). Public investment multipliers: Evidence from stock returns of the road pavement industry in Japan. Journal of Economic Dynamics and Control, 133, Article 104247. https://doi.org/10.1016/j.jedc.2021.104247
Kushawaha, D., & Jain, M. (2025). Understanding the dynamics of public debt on renewable energy investment in developing countries. Energy Economics, 147, Article 108500. https://doi.org/10.1016/j.eneco.2025.108500
Mancini, A. L., & Tommasino, P. (2023). Fiscal rules and the reliability of public investment plans: Evidence from local governments. European Journal of Political Economy, 79, Article 102415. https://doi.org/10.1016/j.ejpoleco.202 3.102415
Marín-Rodríguez, N. J., Gonzalez-Ruiz, J. D., & Peña, A. (2024). Analyzing fiscal sustainability in Latin American countries: A time–frequency perspective. Economies, 12(5), Article 111. https://doi.org/10.3390/economies12050111
Matvejevs, O., & Tkacevs, O. (2025). Invest one – get two extra: Public investment crowds in private investment. European Journal of Political Economy, 90, Article 102384. https://doi.org/10.1016/j.ejpoleco.2023.102384
Menguy, S. (2025). How harmful is a high share of public expenditure in GDP? Economies, 13(3), Article 74. https://doi.org/10.3390/economies13030074
Ocolișanu, A., Dobrotă, G., & Dobrotă, D. (2022). The effects of public investment on sustainable economic growth: Empirical evidence from emerging countries in Central and Eastern Europe. Sustainability, 14(14), Article 8721. https://doi.org/10.3390/su14148721
Paczos, W., Sawulski, J., & Leśniewicz, F. (2023). How much do public and private sectors invest in physical and human capital? Towards a new classification of investments. International Review of Economics and Finance, 88, 1324–1336. https://doi.org/10.1016/j.iref.2023.0 7.010
Pallante, G., Russo, E., & Roventini, A. (2023). Does public R&D funding crowd-in private R&D investment? Evidence from military R&D expenditures for US states. Research Policy, 52, Article 104807. https://doi.org/10.1016/j.r espol.2023.104807
Papagni, E., Lepore, A., Felice, E., Baraldi, A. L., & Alfano, M. R. (2021). Public investment and growth: Lessons learned from 60-years experience in Southern Italy. Journal of Policy Modeling, 43, 376–393. https://doi.org/10.1016/j.jpolmod.2019.12.003
Peng, D., Farooq, U., Alam, M. M., & Khudoykulov, K. (2024). Exploring the role of governance in determining public-private investment in energy: New empirical insights from ASEAN. Socio-Economic Planning Sciences, 96, Article 102096. https://doi.org/10.1016/j.seps. 2024.102096
Petrović, P., Arsić, M., & Nojković, A. (2021). Increasing public investment can be an effective policy in bad times: Evidence from emerging EU economies. Economic Modelling, 94, 580–597. https://doi.org/10.1016/j.econmod.2020 2020.
Shao, J., & Wang, Y. (2026). Public data openness, business environment improvement and foreign direct investment inflow into China. International Review of Economics and Finance, 110, Article 105556. https://doi.org/10.1016/j.iref.2026.105556
Shi, H., Song, D., & Ramzan, M. (2025). Institutional quality, public debt, and sustainable economic growth: Evidence from a global panel. Sustainability, 17(14), Article 6487. https://doi.org/10.3390/su17146487
Su, T. D., & Nguyen, C. P. (2021). Twin balances, public governance and private investment: Quantile estimation for OECD countries. International Economics, 165, 85–93. https://doi.org/10.1016/j.inteco.2020.12.004
Sánchez, M. V., Cicowiez, M., & Ortega, A. (2022). Prioritizing public investment in agriculture for post-COVID-19 recovery: A sectoral ranking for Mexico. Food Policy, 109, Article 102251. https://doi.org/10.1016/j.foodpol.2022 .102251
Takahashi, M., Takaku, R., Ashida, T., & Ibuka, Y. (2025). Public investment on health and voter responses: Evidence from the mass vaccination during COVID-19. European Journal of Political Economy, 89, Article 102718. https://doi.org/10.1016/j.ejpoleco.2025.102718
Boys, T. (2026). Public investment, economic growth, and wealth distribution. Journal of Economic Dynamics and Control, 184, article 105280. https://doi.org/10.1016/j.je dc.2026.105280
Wang, F., Chen, X., & Yang, G. (2025). Fiscal expenditure responsibilities of public-private partnerships and corporate innovation investment—evidence from prefecture-level cities in China. China Journal of Accounting Research, 18, Article 100416. https://doi.org /10.1016/j.cjar.2025.100416
Wang, J., & Xia, W. (2022). Public attention and investment efficiency: Incentive effect or deterrent effect? Analysis on heterogeneous bilateral stochastic frontier model. Technological Forecasting and Social Change, 185, Article 122043. https://doi.org/10.1016/j.techfore.2022.122043
Wang, Y., & Li, J. (2024). How public service investment affects public incomes: Evidence from Shanghai, China. Sustainability, 16(13), Article 5562. https://doi.org/10.3390/su16135562
Yuen, T. H. A., & Yuen, W. K. T. (2024). Public investment on renewable energy R&D projects: The role of geopolitical risk, and economic and political uncertainties. Energy Economics, 138, Article 107837. https://doi.org/ 10.1016/j.eneco.2024.107837
Zhang, S., Cai, R., & Wang, S. (2025). Impact of public investment on agricultural productivity growth: Evidence from China. Economic Analysis and Policy, 85, 1442–1455. https://doi.org/10.1016/j.eap.2025.02.005
Zheng, F., Lin, H., Liu, B., & Fei, R. (2026). Scrutiny and spending shifts: How participatory budgeting reduces local government debt. Sustainability, 18(1), Article 399. https://doi.org/10.3390/su18010399
Published
2026-11-10
How to Cite
Permadi, M. A., & Fuadah, L. L. (2026). Financing the Future: Rethinking Public Investment in an Era of Fiscal Uncertainty and Sustainable Development. International Journal of Education, Vocational and Social Science , 5(04), 5298-5324. https://doi.org/10.63922/ijevss.v5i04.7363
Contact Person +6282139474255
Email : ijevss@citakonsultindo.or.id / editor.ijevss@gmail.com
