Abstract: The macro-prudential fiscal policy can effectively reduce the fiscal footprint of monetary policy, which is playing a crucial role in controlling debt growth and ensuring economic security. On the basis of establishing a dynamic stochastic general equilibrium model for an open economy, this paper explores the issue of government expenditure multiplier by introducing a macro prudential fiscal policy framework and financial friction factors. The findings show that: firstly, the government expenditure multipliers under the framework of macro-prudential policies is bigger than that without government expenditure multipliers. When only considering the government department debt, the government expenditure multipliers under the framework of macro-prudential policies is the biggest, while the welfare losses are minimized; when the debt of both households and government departments are considered, the government expenditure multiplier under the macro prudential policy framework is smaller than that under the benchmark model. Secondly, under the macro-prudential policy framework, the government expenditure multiplier is smaller under a floating exchange rate system than under a fixed exchange rate system, which is in line with the classical macroeconomic theory. Thirdly, the government expenditure multiplier under financial friction is larger than that without considering financial friction. Given the positive role of macro-prudential policies in controlling debt risks and leveraging the multiplier effect of government spending, it is recommended that government departments introduce macro-prudential policies in the field of fiscal policy.

Key words: government expenditure multiplier, financial frictions, macro-prudential policy, dynamic stochastic general equilibrium model