Abstract: Considering financial friction and the zero lower bound of interest rate, this paper uses Chinese economic data to calibrate and estimate model parameters to simulate the macroeconomic effects of China's fiscal policy and the size of the fiscal multiplier. The impact of expenditure shocks on macroeconomic variables is greater than that of the frictionless situation, and the value of the fiscal multiplier is greater than that of the frictionless situation; (2) the macroeconomic effect of tax policy is smaller than that of government spending, and the multiplier is much smaller than that of government spending, but tax policy The long-term effect is larger than the short-term effect; (3) the fiscal multiplier is significantly larger than the non-zero interest rate lower bound in the case of zero interest rate lower bound; (4) welfare analysis shows that the welfare loss considering the effect of fiscal policy in the case of financial friction is relatively small ; (5) The parameter sensitivity analysis shows that the increase of the financial friction parameter has an increasing impact on the fiscal multiplier, but the autoregressive parameter of government expenditure is not sensitive to the impact of the fiscal multiplier. The research in this paper can provide theoretical support for the current proactive fiscal policy and reference for future structural adjustment.

Key words: financial friction; the zero lower bound of interest rate;fiscal multiplier