At the end of 2008, the global economic recession, with the subprime mortgage crisis as the outbreak point, had a great impact on China's economic development. Therefore, the China government has restarted the dual active fiscal and monetary policies, and introduced an unprecedented government investment and economic stimulus plan. There is no doubt about the effect of implementing a proactive fiscal policy. China's economy has recovered rapidly, showing a strong growth momentum. However, the main content of fiscal expenditure is still extensive expansion, such as focusing on infrastructure construction and mainly flowing to the leading departments of state-owned economy, and less involving welfare protection, consumption stimulus, technological progress and structural adjustment. Therefore, different voices focus on the effectiveness and sustainability of fiscal policy, and pay more attention to whether the increase of government expenditure can be effectively transmitted to private investment and consumption, so as to achieve the reversal of growth mode and the improvement of growth quality while completing the total stimulus. How the growth effect of fiscal policy is realized and transmitted, and how the government can improve the efficiency of fiscal regulation and control and form a sustainable growth path by optimizing the scale and structure of expenditure. The research on this issue has long been derived from "whether the government should intervene in the economy" to "how the government should intervene in the economy", and the analysis of the impact of fiscal expenditure changes on the economy has also developed from theoretical debate and discussion to empirical test and analysis. Focus on measuring the effectiveness of fiscal policy under different systems, policies and development conditions. Combined with the current reality of China, it highlights its value and significance. The implementation of a large number of counter-cyclical fiscal policies has indeed effectively stimulated economic growth, but can the implementation of active fiscal policies effectively transmit to private consumption and investment while maintaining growth? Can the economic stimulus plan play a role in a long period of time and provide long-term impetus for China's economic prosperity? Based on this, this paper re-examines the growth effect of local government expenditure in China from three aspects: growth, investment and consumption, and investigates how the typical characteristics of local government behavior are reflected in the transmission of the effect, thus giving an empirical judgment on the effectiveness and sustainability of fiscal policy. Specifically, in the first and second chapters, this paper combs the relevant research and basic theory of the growth effect of government expenditure, and describes the influence of government expenditure changes on growth, investment, consumption, employment and other economic systems with the help of AD-AS and IS-LM analysis frameworks, thus forming the path of government expenditure affecting economic growth. Then, on this basis, the third chapter makes an empirical calculation of the total effect of local government expenditure and economic growth, and the results confirm the main position of local government financial supervision, which also provides a basis for this paper to focus on inter-provincial governments. However, the growth effect of local government expenditure shows obvious time-varying characteristics, and more importantly, the different components of government expenditure have obvious differences in their effects on the economy. The increase of government productive expenditure and government investment has a more prominent stimulating effect on the economy. Under the current government assessment and performance evaluation system with regional economic growth as the core, it is not difficult to explain the government's investment hunger and impulse, and the government's expenditure structure focuses on productive expenditure and microeconomic fields while ignoring welfare and public goods. The increase of investment expenditure can indeed produce more significant growth performance, and the structural contradiction is precisely due to the distortion of incentive mechanisms among governments at different levels. The fourth chapter mainly studies the relationship between government expenditure and private investment. The results of impulse response analysis actually deny the long-term effectiveness of fiscal expenditure on private investment. Although the increase of government expenditure can indeed promote the rise of private investment in the short term, this relationship will reverse with the passage of time, and it has not shown obvious crowding-in effect in the long run. At the same time, the increase of central investment can not significantly affect the changes of private investment. This part shows that the economic stimulus plan is more a substitute for private investment and private economy, and the implementation of a proactive fiscal policy only promotes growth by generating direct social demand. Coupled with the structural differences between China's industry and sector economy, perhaps, this has formed two cycles. Within the industry dominated by the state-owned economy, the increase of government expenditure and investment has formed a strong industrial demand, which is transmitted through the industrial chain. The weak reflection of traditional competitive fields and private economic sectors has also promoted the rise of private investment to some extent. However, the relative independence of the two cycles and the increase in capital cost caused by the limited money supply will have a crowding-out effect on private investment in a longer period of time, thus forming the reality of "the hot is hotter" and "the cold is colder". If we consider the investment preference of local governments and the intervention of state-owned capital in traditional and downstream industries, this crowding out will happen in a shorter time. The implementation of a proactive fiscal policy has actually worsened the pattern of structural imbalance. When we turn our eyes from investment to consumption, can the increase of government expenditure improve the consumption level, and can the implementation of active fiscal policy help the expansion of domestic consumer market and the formation of consumption-driven mechanism? We analyzed it in Chapter 5. Based on the flexibility of the model, we introduce control variables to measure the characteristics of government behavior when constructing the regional consumption panel model. It has indeed achieved remarkable results. The difference in the relative scale of government expenditure, that is, the mode of big government and small government, as well as the constraint of government expenditure, significantly affects the transmission and effect of fiscal policy on consumption. Generally speaking, under the big government model, the crowding-in effect of fiscal policy on household consumption is more prominent, while the productive expenditure of local government has crowding-out effect on household consumption, but the role of unproductive expenditure is just the opposite. Therefore, increasing unproductive expenditures and transfer payments can really play a positive role in promoting consumption. However, all this must depend on the construction of government expenditure restraint mechanism and the improvement of supervision mechanism. The empirical results actually show such a scenario. With the transformation of provincial government functions and the clarity of government boundaries, the government will focus on the construction of public services. The financial model of small government seems to be more efficient, but if it is not supplemented by effective supervision and restriction mechanism, the proportion of extra-budgetary funds will increase, the autonomy of local government's ability to control funds will be strengthened, and the distortion of government revenue and expenditure system will be further deepened. Fiscal policy may come to the opposite conclusion: the increase of fiscal expenditure will actually curb consumption. Finally, after measuring the growth effect of local government expenditure, we also analyze the wisdom of fiscal adjustment and the relative efficiency of government expenditure from the perspective of efficiency in chapter 6. Combined with the current behavior characteristics and target needs of local governments, we have adjusted the research direction that often focuses on the difference between service function and public goods provision ability when measuring government efficiency, reconstructed the input-output accounting system of government expenditure, and focused more on the realization of regulatory objectives. The results show that the expenditure efficiency of local governments in China varies greatly, and there is a lot of room for improvement. From this perspective, paying more attention to the improvement of efficiency rather than the adjustment of expenditure scale is an important direction of fiscal policy optimization in the future. At the same time, the investigation of government efficiency in different regions also reveals that there are obvious regional characteristics of government efficiency differences in eastern, central and western regions of China. In particular, the results show that there is a continuous process of efficiency deterioration in the central area. On this basis, it further analyzes the change of government efficiency and its influence. The conclusion confirms the hypothesis that "small government is more efficient", but interestingly, in the western region, greater government expenditure and further enhancement of government intervention seem to have a positive impact on economic growth and the improvement of government efficiency. Under the conditions of different levels of economic development, there are completely different paths to improve government efficiency.