The bulk elastic modulus of oil is an important parameter of hydraulic controlling system. Researched on the closed hydraulic system, the transfer function between the shaft angle of the hydraulic motor and the swing angle of the variable pump was established, and its dynamic responding characteristics were analyzed under three different bulk elastic modulus of oil. The results illustrate that when the bulk elastic modulus is 493.9 MPa, the peak over shoot is 163% and the system oscillation is relatively strong; when the bulk elastic modulus is 1 402.7 and 1 663.3 MPa, the rising time and settling time are 5.36 and 10.1 s respectively and its rapidity is poor,but the amplitude margin and phase margin are larger when the bulk elastic modulus is 1 663.3 MPa and the system is more stable.In order to improve the rapidity of the system, the controller was designed. The rising time and settling time of the optimized system are 1.62 and 5 s which are reduced by 61.7% and 50.5% respectively comparing to the original system. The research methods can provide reference for the analysis and optimization of dynamic response of other hydraulic system.