Journal of Economic Perspectives
ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)
The Role of Private Debt in the Financial Ecosystem
Journal of Economic Perspectives
(pp. 73–94)
(Complimentary)
Abstract
This paper provides an introduction to the modern private debt market and examines its rapid expansion following the 2007–2009 global financial crisis. Traditionally, economists distinguished between public debt markets and private debt in the form of bank lending. In contemporary markets, however, "private debt" refers to credit originated and held by nonbank financial intermediaries, including private credit funds and business development companies. The paper reviews the key drivers of the sector's growth; analyzes the distinctive features of private lending arrangements and funding structures; and discusses the implications for traditional banking, financial intermediation, and financial stability. While the sector's rapid growth and increasing complexity warrant careful monitoring, the paper argues that private debt represents an important and likely durable component of modern financial markets.Citation
Ivashina, Victoria. 2026. "The Role of Private Debt in the Financial Ecosystem." Journal of Economic Perspectives 40 (4): 73–94. DOI: 10.1257/jep.20251482Additional Materials
JEL Classification
- E44 Financial Markets and the Macroeconomy
- G01 Financial Crises
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G23 Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- G24 Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill