Abstract: Using the cointegration relationship test, impulse response function and variance decomposition technique to analyze the influence relationship between China's fiscal policy and real economic variables, we find that there is a significant cointegration relationship between fiscal policy variables and real GDP and private investment, and fiscal expenditure has a significant positive impact on the long-term equilibrium relationship of the real economy. Dynamic analysis shows that fiscal expenditure has a significant impact on the real economy and private investment, which means that changes in fiscal policy can achieve obvious results in stabilizing the economy in the short term.

Keyword: Fiscal policy shock; Dynamic effects; Private investment; Real GDP